ISLAMABAD: The International Monetary Fund (IMF) has urged Pakistan to implement higher taxes on both the salaried and business classes, alongside increasing sales tax rates on petroleum products, medicines, and unprocessed goods. If accepted, these proposals could disproportionately impact middle and upper-middle-income groups.
Commencing the initial discussions, the IMF and the Federal Board of Revenue (FBR) initiated talks, concentrating on evaluating the FBR’s performance and addressing IMF recommendations regarding the elimination of special tax regimes and preferential treatments.
During the inaugural meeting between the IMF delegation and FBR leadership concerning the second review of the Stand-by Arrangement (SBA), the FBR Chairman provided an overview of tax collection, digital initiatives, and administrative reforms.
The IMF has proposed that the FBR increase tax rates for both salaried and non-salaried individuals, while introducing an 18 percent sales tax on petroleum products, stationery items, medicines, and unprocessed food. Additionally, they suggest integrating three million retailers into the tax system.
Moreover, the IMF has urged the repeal of remaining exemptions for donations and non-profit organizations as outlined in the Second Schedule of the Income Tax Ordinance, making them eligible for tax credits.
The Fund has suggested a reassessment of the tax credits for charitable donations and certain individuals to determine the necessity for changes in eligibility criteria.
Expanding the National Tax Council’s mandate to include harmonization of tax rates and establishing a Tax Policy Unit within the Ministry of Finance, Revenue, and Economic Affairs are among the IMF’s recommendations.
The discussions will proceed, with a focus on restructuring the FBR and assessing revenue collection projections for the fiscal year 2023-24.
