Islamabad:

Background contacts between President Asif Zardari and Deputy Prime Minister Ishaq Dar led to a breakthrough on the issue of the new income tax law introduced in Sindh on Monday, after all previous efforts by the federal government failed to break the role, insiders to reveal on Tuesday.

Government sources told The Express Pakinomist that the Ministry of Finance’s several attempts to convince the Sindh government to immediately introduce the agricultural income tax regime to save the International Monetary Fund (IMF) program was unsuccessful.

They said that due to the delay of more than four months with the adoption and implementation of the law; The IMF was not ready to give dates for the first review interviews. This had also been revealed by Sindh Chief Minister Murad Ali Shah on the floor of parliament while talking about the legislation.

“We were told bluntly that the IMF team would not arrive and the country would default if the agricultural tax bill was not passed in a law,” Chief Minister Shah told the Sindh Assembly Session.

After the Ministry of Finance’s efforts remained fruitless, the sources, Ishaq Dar, and the economic team visited the presidency a few days ago to convince the president of the case.

The president first said he would ask the Sindh government to introduce the bill after his return from a five-day China visit that began on Tuesday.

At Dars Insisting, however, the president immediately called Chief Minister Shah, and also to the Balochistani Chief Minister Sarfaraz Bugti to introduce new bills into their respective provincial assemblies to charge the agricultural income tax in the two provinces.

According to sources, the government recognized DAR’s positive contribution to convincing President Zaradri to remove a major obstacle in the way of the IMF visit. An official in the Ministry of Finance said the political sharpness of Dar helped achieve the result, the ministry had tried hard to achieve in the last few months.

On Monday, after the Sindh assembly unanimously adopted Sindh Agricultural Income Tax Act Bill, 2025, Finance Minister Muhammad Aurangzeb thanked the provincial governments for the implementation of the IMF’s most important state.

The Ministry of Finance now feels confident about the success of the first review of the IMF program. Last week, Aurangzeb had said that the IMF team may come either by the end of February or early March.

The IMF had imposed the condition that the provincial governments increase the abysmal low agricultural income tax to as high as 45% and impose up to 10% super tax on the high income -earning landlords.

At the end of October, each province changes their agricultural income tax law and regime to fully adapt it to the federal personal income tax regime for small farmers and the federal corporate tax regime for commercial agriculture so that taxation can begin from 1 January, 2025, “according to the IMF – The program documents.

The deadline had been missed by all provincial governments, but later the provinces began to introduce these laws because of the IMF’s harsh attitude. The national tax power, signed by all provinces, also stated that provinces would tax the agricultural income under a new regime from January 1, 2025 with collection for the second half of the financial year 2024-25.

Currently, the federal personal income tax rates are as high as 50%, and the company rates are 29%, excluding the Super Income Tax. Even the IMF’s mission manager to Pakistan, Nathan Porter, had said during internal meetings that his fingers were crossed when it came to the introduction of the agricultural income tax in Sindh, the sources said.

The sources said the IMF was now expected to communicate a date of the review mission and its successful implementation would lock the other loan tranche worth over $ 1 billion.

When he spoke on the floor of parliament, chief minister Shah had criticized the federal government for not engaging the provinces in conversations with the IMF, although the agricultural tax was a provincial question.

Sindh Agricultural Income Tax proposal proposes that the annual agricultural income of up to RS600,000 will be exempt from tax, while the maximum tax rate for income exceeding RS5.6 million will be 45%.

A progressive super charge has also been introduced; Without super tax on the annual agricultural income of up to RS150 million and a maximum of 10% super tax that applies to income that exceeds RS500 million annually. For the small agricultural companies, the new rate will be 20%, and for the large companies it will be 29%, excluding the impact of the super tax.