Pakistan’s salaried class could receive much-needed tax relief in the upcoming budget, as the International Monetary Fund (IMF) and Pakistan have made progress on a proposed reduction in tax rates.
As per The News, the global lender and FBR had a meeting on Friday in which the Fund official agreed to the proposal to reduce rates in various slabs of the salaried class.
The International Monetary Fund (IMF) has projected that proposed tax relief measures for Pakistan’s salaried class could result in a revenue shortfall of approximately Rs56 to Rs60 billion in the upcoming fiscal year. To address this gap, the Federal Board of Revenue (FBR) is expected to introduce alternative income tax measures.
While discussions are ongoing, the specific adjustments to the tax slabs for salaried individuals have not been finalized. One key proposal under consideration involves reducing the tax rate in the first income slab—covering annual earnings between Rs600,000 and Rs1.2 million—from the current 5 percent to 1 percent. This change would lower the annual tax liability in this bracket from Rs30,000 to Rs6,000 for individuals earning up to Rs100,000 per month.
The IMF, however, is advocating for a 1.5 percent rate on the same slab, which would increase the tax to Rs9,000 for that income level.
Further proposals include a 2.5 percent reduction in each subsequent income slab, with the top marginal tax rate being decreased from 35 percent to 32.5 percent. As of now, the total fiscal impact of these adjustments is still under review and has yet to be fully reconciled between IMF representatives and senior FBR officials.
