ISLAMABAD [Pakistan], The International Monetary Fund (IMF) has urged the Federal Board of Revenue (FBR) to revoke the discretionary powers held by the Board and the Cabinet in giving tax incentives. Additionally, it seeks amendments in tax laws related to NGOs, charitable organizations and taxing pensioners, Geo News reported. With regard to pensions, the IMF suggests taxing either pension contributions or benefits. It proposes to eliminate the deduction benefit of Voluntary Payment T Workers' Participation Fund and eliminate pension exemption, advocating taxation through one of the options mentioned Important discussions between Pakistan and IMF starting from Monday this week About to start. According to the report, Pakistan formally seeks a new bailout package of US$6 to 8 billion under the Extended Fund Facility (EFF), with the possibility of an increase through climate finance. The IMF has outlined a wish list regarding tax incentives, which emphasizes this.Incentives should be given only if their economic benefits, such as increased employment and value addition to the economy, outweigh their costs to the budget. "In the current dire fiscal situation, few, if any, existing stimulus will meet that test. Any remaining stimulus must be well-designed and cost-based, rather than benefit-based," the IMF told the FBR. The IMF distinguishes between cost-based incentives, such as accelerating depreciation and special tax cuts, designed to reduce initial individual costs and encourage new investment. and profit-based incentives, such as TA holidays and preferential tax rates, which are less effective and may only benefit already profitable projects.Furthermore, the IMF highlights the adverse effects of special tax regimes in the construction sector, advocating their removal in order to increase taxes. Efficiency To streamline tax incentives, the IMF suggests eliminating most tax incentives in the Income Tax Ordinance (ITO), retaining only those tax incentives deemed legally binding or necessary for policy reasons. It estimates that this action could generate an additional 0.2% of GDP in revenue. In terms of tax administration, the IMF recommends repeal of the discretionary power of the FBR to grant tax incentives to industrial undertakings and the discretionary power of the Cabinet to grant tax incentives. It proposes to enhance the tax expenditure report with a chapter assessing the costs and benefits of tax incentives.Future tax incentives, if given, should be time bound and subject to regular cost-benefit assessments. If costs exceed benefits, incentives should be immediately withdrawn or changed to cost-based incentives. Additionally, the IMF suggests reforming the minimum tax regime, implementing a half-year rule to limit deductions in the first year of the asset's use, and ultimately repealing the minimum tax. As the capacity for corporate income tax (CIT) administration strengthens with respect to agricultural taxation, the IMF recommends harmonizing tax rates and bases between the federal and provincial levels. It also recommends phasing out the SME tax framework for the manufacturing sector. and recommends subjecting the construction sector to standard income tax regimes.Charitable donations and non-profit organizations face proposed reforms, with the IMF calling for streamlined rules and the replacement of tax credits for exemptions to enhance regulatory oversight. “All types of charities and non-profit organizations should be subject to the same rules,” stressed the IMF, advocating the repeal of remaining exemptions and the introduction of tax credits. It also suggested reviewing the charitable donation tax credit and eligibility requirements for certain individuals, Jio New reported.