March 27, 2024
IMF Urges Pakistan: Tax Crypto Profits to Unlock $3 Billion Bailout
Policy & Regulation

IMF Urges Pakistan: Tax Crypto Profits to Unlock $3 Billion Bailout

In a bid to secure vital financial assistance, Pakistan faces mounting pressure from the International Monetary Fund (IMF) to implement significant tax reforms, including the taxation of cryptocurrency investments.

As discussions surrounding a $3-billion stand-by arrangement (SBA) unfold, Pakistan’s Federal Board of Revenue (FBR) finds itself at the centre of pivotal negotiations.

IMF’s Recommendations on Taxation

During the ongoing review talks for the $3-billion SBA, the IMF strongly recommended that Pakistan’s FBR levy Capital Gains Tax (CGT) on cryptocurrency investments. This move is deemed essential by the IMF as one of the requirements for Pakistan to qualify for the much-needed bailout funds.

In addition to taxing cryptocurrency gains, Pakistan has been urged by the IMF to reassess its taxation policies regarding real estate and listed securities. The proposed adjustments aim to ensure the collection of annual taxes on capital gains from real estate assets, regardless of whether the owner opts to sell or retain the property.

Moreover, stringent tracking and reporting requirements may be imposed on property developers, with non-compliance penalties serving as a means to enforce these new tax regulations within the real estate market.

The crypto community in Pakistan refuted the government’s decision to ban crypto trading based on the IMF’s recommendation. Source: @Crypto_Pakistan on X

Integration into Bailout Package

Local reports indicate that the IMF’s recommendations regarding taxation could potentially be integrated into the upcoming bailout package under the Extended Fund Facility (EFF).

Consequently, Pakistan’s fiscal budget for the 2024–2025 financial year may officially introduce a rigorous taxation framework, including the imposition of taxes on cryptocurrency capital gains.

The $3 billion in IMF aid is intended to address the challenges posed by Pakistan’s hyperinflated fiat economy, stemming from factors such as geopolitical tensions, natural disasters, and unstable national governance. The objective of the bailout funds is to prevent a potential debt default and stabilize Pakistan’s economic trajectory.

Negotiations and Disbursement

The four-day IMF review, commencing on March 14, marks a critical juncture for Pakistan. Approximately $1.1 billion of the bailout funds will be disbursed if Pakistan agrees to adhere to the conditions set forth by the IMF, including the implementation of tax reforms.

The call for taxing cryptocurrency capital gains comes in stark contrast to previous statements made by Aisha Ghaus Pasha, the minister of state for finance and revenue. Pasha had previously asserted that Pakistan would never legalize cryptocurrency trading, highlighting the evolving nature of the country’s fiscal policies.

Pakistan’s Bet on Artificial Intelligence

Amidst these fiscal deliberations, Pakistan is placing a strategic bet on AI as part of its long-term economic vision. Intending to produce 1 million AI-trained IT graduates by 2027, Pakistan is positioning itself as a hub for technological innovation.

The policy framework outlines 15 targets, spanning from 2023 to 2028, demonstrating Pakistan’s commitment to leveraging AI for societal and economic advancement.

To support these ambitious initiatives, Pakistan intends to establish a National AI Fund, utilizing underutilized resources and funds from the Ministry of IT and Telecom. This initiative underscores Pakistan’s dedication to harnessing the transformative potential of AI for national development and prosperity.

A snippet of Pakistan’s national AI policy draft. Source: Ministry of IT and Telecom

As Pakistan grapples with economic challenges and navigates the demands of international financial institutions, the implementation of tax reforms and investments in emerging technologies like AI will play pivotal roles in shaping the country’s economic future.


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