Sindh’s Stance: Sindh has yet to commit to a timeline for passing its AIT law, which would triple tax rates on agricultural income. The provincial representative cited the need for political leadership’s involvement, despite the draft bill being ready.

Punjab’s Legislation Controversy: Punjab passed its Agriculture Income Tax Act 2024 but excluded specific income tax rates, delegating this authority to the provincial cabinet. This move has sparked concerns about constitutional and legislative processes, as income tax rates are typically decided by elected representatives.

Livestock Tax Debate: The federal government challenged Punjab’s inclusion of livestock income in its tax law, arguing it is a federal subject. Khyber Pakhtunkhwa (K-P) and Sindh questioned Punjab’s deviation from agreed-upon practices, suggesting the potential for legal disputes.

Progress in Other Provinces: Balochistan and K-P have approved AIT draft bills but have yet to pass them in their assemblies. This delay may jeopardize the IMF-mandated alignment of provincial and federal tax regimes by January 2025.

Harmonization Efforts: The National Tax Council (NTC) discussed tax harmonization, including a common framework for property taxation and a unified tax return system. However, differences in provincial tax rates remain a significant hurdle.

International Oversight: Representatives from the World Bank attended the meeting, supporting harmonized tax policies but offering views on service taxation lists that met resistance.

IMF Conditions: The IMF has mandated the alignment of provincial AIT laws with federal tax policies, with the aim to increase maximum AIT rates from 15% to 45%. Compliance is tied to the country’s broader fiscal reforms.

This situation underscores challenges in federal-provincial coordination on tax policies, especially under the constraints of international financial agreements. Without alignment, Pakistan risks further delays in meeting its fiscal reform goals.