IMF Urges Pakistan to Expand Tax Framework to Include Cryptocurrencies

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In a bid to bolster tax collection on capital gains, the International Monetary Fund (IMF) has proposed to the Federal Board of Revenue (FBR) in Pakistan the incorporation of cryptocurrencies into the tax framework.

As part of a comprehensive strategy to enhance revenue generation, the IMF's recommendations encompass a revision of tax slabs for real estate and listed securities, with a focus on ensuring the taxation of all gains in these sectors.

Moreover, the IMF has emphasized the importance of monitoring and reporting all property transfers by developers before the completion and registration of property titles. This move aims to regulate the trade of plot files in housing schemes and combat tax evasion practices within the real estate sector.

Non-compliance with these regulations could result in penalties for developers, aligning with the IMF's objective of integrating these transactions into the formal tax system.

These proposals are expected to be integrated into Pakistan's forthcoming bailout package under the Extended Fund Facility (EFF) and could potentially be included in the upcoming fiscal year's budget through the finance bill.

The IMF's technical assistance report underscored the challenges faced by Pakistani authorities in taxing capital gains from real estate transactions, citing the informal nature of property transfers as a key obstacle to effective taxation.

To address this issue, the IMF has recommended holding property developers accountable for reporting these transactions and ensuring the collection of due taxes on capital gains.

Furthermore, in a move towards modernization and inclusivity, the IMF has advocated for the taxation of investments in cryptocurrencies as part of the capital gains framework. This proposal entails a review of tax slabs for different asset classes to ensure a comprehensive approach to taxing capital gains.

To facilitate these changes, the IMF has suggested amending the Income Tax Ordinance to broaden the definition of "personal movable property" to encompass a wider array of investment assets, thereby paving the way for a more robust and equitable tax regime in Pakistan.