Pakistan pushes for tax relief to salaried class in IMF budget talks

ISLAMABAD: Pakistan is in talks with the International Monetary Fund (IMF) to address concerns over imposing income tax on the salaried class while meeting revenue targets, ARY News reported citing sources.

According to sources, during virtual budget discussions, the IMF questioned how Pakistan would achieve its tax collection goals if tax relief is provided to salaried individuals.

The Federal Board of Revenue (FBR) briefed the IMF on measures to meet these targets, but the lender insisted on eliminating all sales tax exemptions and concessions to boost revenue.

The IMF has proposed imposing an 18% sales tax on solar panel imports and a 1.5% withholding tax on all imported goods, with exemptions limited to raw materials used by industries, according to sources.

Additionally, the IMF demanded the registration of builders and developers in the real estate sector to bring them into the tax net. Partial agreement was reached on increasing salaries and pensions, but further rounds of negotiations are expected to finalize these discussions.

Read more: FBR ‘requests’ IMF to reduce tax collection target for FY2025-26

According to new proposals for salaried class, the income tax ratio will be brought to 2.5 per cent from 5pc for the individuals earning Rs100,000 per month.

Individuals earning Rs183,000 per month will likely pay income tax upto 12.5 per cent in the new budget proposals.

The income tax ratio will be brought down to 22.5pc from current 25pc for the salaried individuals slab of Rs267,000.

The roposals are expected to be discussed in detail with the IMF as part of the ongoing talks for the upcoming budget.