The International Monetary Fund (IMF) has rejected the Government of Pakistan’s proposal to impose a Capital Value Tax (CVT) on movable assets, including gold, cash, and other valuables.

Sources confirmed that the IMF also dismissed a controversial proposal to levy a Federal Excise Duty on day-old chicks.

However, the IMF approved a new tax on digital services, which is expected to generate around Rs10 billion in revenue.

In preparation for the upcoming federal budget, officials are considering several additional tax measures. These include:

• increasing the tax on mutual fund dividends to 20%
• increasing the withholding tax on interest income to 20%
• ending tax exemptions for venture capital firms
• withdrawing income tax relief currently available to the cinema industry.

The IMF did not support any reduction in the 35% top income tax slab. It also insisted on maintaining a 10% surcharge on monthly incomes exceeding Rs500,000.

However, the IMF endorsed lowering tax rates within the four middle-income brackets and hinted at modest relief for those earning below Rs500,000 annually.

While the IMF opposed raising the income tax exemption threshold to Rs1.2 million, it allowed the government to consider reducing the initial income tax rate from 5% to 1%.

Officials have briefed Prime Minister Shehbaz Sharif on the initial budget framework.

The federal government plans to unveil the full budget in the National Assembly on June 10, while the Economic Survey will be released on June 9, the third day of Eid.

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Also, the government has been instructed to draft the budget 2025–26 strictly under the terms of the Staff-Level Agreement (SLA) reached between Islamabad and the IMF before the release of the latest loan tranche.

The government is to secure its approval from Parliament by the end of June.