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fairer balance of fiscal effort between the federal and provincial governments, which have agreed to re-balance spending activities in line with the 18th Constitutional Amendment through the signature of a National Fiscal Pact that devolves to provincial governments higher spending for education, health, social protection and regional public infrastructure investment, enabling improved public service provision. At the same time, the provinces will take steps to increase their own tax-collection efforts, including in sales tax on services and agricultural income tax. On the latter, all provinces are committed to fully harmonising their Agriculture Income Tax regimes through legislative changes with the federal personal and corporate income tax regimes and this will become effective from January 1, 2025”—IMF’s Press Release No. 24/273, July 12, 2024.

The staff level agreement between Pakistan and the International Monetary Fund concluded on July 12, 2024, subject to the approval of the latter’s executive board. The $7 billion, 37-month Extended Fund Facility will have a far-reaching impact for revenue mobilisation at the national level, distribution of tax collection between the federation and the federating units as well as revamping of the outdated and under-performing national tax system.

There has been constant pressure from the IMF for reconsidering the 7th NFC Award. The reduction in the provinces’ shares is not possible unless the constitution is amended. Obviously, there will be resistance from the provinces. The issue of fiscal consolidation is not because of assumed inequitable distribution (sic) between the Centre and the provinces, but the size of the cake—the divisible pool. Both the Federation and the Federating Units have failed in the past to harness the tax potential by not taxing the rich. The IMF, too, has also failed to issue any report after 2016 to indicate the true tax potential of Pakistan.

A 2016 report by the IMF, titled Unlocking Pakistan’s Revenue Potential estimated Pakistan’s actual tax potential at Rs8 trillion. It mentioned: “The latest National Finance Commission award, signed in 2010, advanced fiscal........

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