Crypto Gains in IMF’s Crosshairs for Pakistan Tax Reforms

As Pakistan seeks a crucial bailout, the IMF is demanding tax system reforms that would formally bring crypto gains into the tax net.

Man calculating his crypto tax.
Created by Kornelija Poderskytė from DailyCoin
  • IMF recommends Pakistan increase efforts to collect crypto gains
  • Pakistan is negotiating for the final payment of its existing IMF loan.
  • CPI inflation in Pakistan has eased but remains high.

The International Monetary Fund (IMF) has long displayed a hostile stance towards cryptocurrencies. In 2022, the IMF urged El Salvador to remove Bitcoin as legal tender, citing concerns over financial integrity risks. Similarly, it also recommended Argentina take steps to discourage crypto adoption as a condition of approving a $45 billion bailout deal in 2023.

In a renewal of crypto hostilities, the IMF has now set its sights on Pakistan. As part of proposed reforms to broaden the country’s tax base, the organization has recommended the South Asian nation clamp down on untaxed cryptocurrency gains.

IMF Proposes Clampdown on Tax Loopholes

The IMF has recommended that Pakistan’s Federal Board of Revenue (FBR) clamp down on crypto capital gains tax (CGT.) This would subject crypto investments to taxation on gains realized by formally recognizing digital assets as a classification of assets subject to CGT, according to local media.

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These crypto taxation proposals are part of wider tax reforms recommended by the IMF. Other measures include tightening property registration procedures to stamp out CGT evasion in real estate, raising taxes, including on fuel, to bring costs more in line with neighboring countries, and removing exemptions that allow CGT to be avoided after holding assets for a certain period.

These tax reform recommendations may form conditions to be met before the IMF releases the final $1.1 billion installment of Pakistan’s current loan payment.

Pakistan Interest Rates at Record Highs

Pakistan is currently seeking a new $6 billion loan from the IMF, even as it tries to secure the final $1.1 billion installment from its current loan deal. The negotiations come amid a challenging economic backdrop, with Pakistan’s central bank keeping interest rates at a record high of 22% in March to stave off inflationary pressures.

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The IMF has voiced concerns that Pakistan’s falling yet elevated inflation rate could run away again without maintaining tight monetary policy. February’s CPI reading of 23.6% marked a 17-month low, down from 28% in January and well off May 2023’s peak of 38%. However, the IMF expects Pakistan to maintain its hawkish stance despite signs of easing inflation.

On the Flipside

  • Although the IMF‘s initial remit was to help member countries with short-term balance of payments problems, critics argue that the organization has become a tool to impose financial imperialism via the attachment of conditions to the loans.
  • Former IMF chief Rodrigo Rato, jailed in 2018 for embezzlement while serving as chairman of Spanish lender Bankia, is facing fresh allegations related to money laundering and tax evasion.
  • Pakistan first announced its intention to ban crypto in January 2022.

Why This Matters

By pushing for tax reform, particularly concerning the nascent crypto industry, the IMF aims at areas ripe for tax avoidance in Pakistan. Closing these loopholes could fill government coffers and add to economic stability. Still, the prospect of higher taxes and more reporting requirements will undoubtedly hit a nerve with investors and the wider public.

Read about the IMF chair’s recent disparaging comments about crypto here:

IMF Chair Asserts Crypto Is Not Money Amid ETF Buzz

Find out more on Bitcoin SV’s bleak outlook following the Craig Wright legal defeat here:

Craig Wright’s Satoshi Court Loss Puts Bitcoin SV in Doubt

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Samuel Wan

Samuel Wan is a finance professional turned crypto journalist, known for his insightful reporting on market trends, regulatory changes, and technological developments within the digital asset industry. His ability to simplify complex concepts and report the facts has made him a trusted source in the crypto community. Beyond his writing, Samuel is an active mountain biker and gamer.