ISLAMABAD: The federal government has urged provincial administrations to enhance their own-source revenues, particularly through stronger collection of property tax and Agricultural Income Tax (AIT), as Pakistan moves to meet fiscal commitments agreed with the International Monetary Fund (IMF).
This was revealed by senior government officials while talking to Business Recorder, after attending a virtual meeting chaired by Federal Minister for Finance and Revenue Muhammad Aurangzeb with provincial finance ministers on Monday to review economic and fiscal matters, with a special focus on revenue mobilisation and coordination under the IMF programme.
According to official sources, the finance minister stressed that increasing provincial tax revenues would help reduce pressure on the federal government to impose additional taxation on the public in the upcoming fiscal framework.
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The federal government also appreciated provincial governments for achieving agreed fiscal targets and underscored the need for sustained coordination to maintain macroeconomic stability.
The four provinces collectively posted a cash surplus of Rs1.636 trillion during the first nine months (July-March) of the current fiscal year, surpassing the full-year target of Rs1.464 trillion by Rs172 billion. Punjab contributed the highest provincial surplus of Rs824 billion during July-March, followed by Sindh with Rs441billion. Khyber Pakhtunkhwa generated a surplus of Rs253 billion, while Balochistan posted Rs118 billion.
The development comes as the IMF, in its latest report, highlighted Pakistan’s narrow tax base and identified agriculture as the country’s most undertaxed sector despite its significant contribution to the economy.
The IMF noted that agriculture contributes around 24.6 percent to total value added, while the effective tax rate on the sector remains only 0.3 percent. Since agricultural income falls under the provincial domain, the Fund stressed the need for provinces to improve enforcement and implementation of recently revised tax measures.
According to the report, provinces had significantly increased agricultural income tax rates in 2025 to bring them closer to taxation levels applicable to other forms of income. However, revenue collection remained below expectations due to implementation delays and weak enforcement mechanisms. The IMF recommended that provinces fully utilise data-sharing arrangements with the Federal Board of Revenue (FBR), expand automation of AIT procedures and allocate additional human and IT resources for enforcement.
Copyright Business Recorder, 2026
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