ISLAMABAD: The Pakistani government has shared preliminary proposals for the 2025–26 federal budget with the International Monetary Fund (IMF), including a plan to reduce the tax burden on the salaried class by up to 10% across various income brackets. If approved by the IMF, this tax relief could provide savings of up to Rs50 billion for salaried individuals in the upcoming fiscal year.
Formal budget negotiations between the IMF and the Pakistani economic team are scheduled to begin from May 14 and continue through May 22. However, the final venue for the talks is yet to be decided.
The government is prepared to introduce offsetting taxation measures to compensate for the revenue shortfall resulting from the proposed relief. These measures are intended to keep overall fiscal targets intact while stimulating economic growth.
“The IMF team will evaluate and negotiate these proposed measures during the upcoming talks,” one official confirmed.
The Pakistani side aims to limit the scope of negotiations to bridging the fiscal gap created by relief measures, rather than introducing new taxation beyond what is necessary. For example, to offset the Rs50 billion revenue reduction from the salaried class, the Federal Board of Revenue (FBR) is considering alternate tax measures to balance the budget.
From July to April of the current fiscal year, salaried individuals have already contributed over Rs450 billion in taxes—far more than retailers or exporters. This figure is up from Rs368 billion paid during the entire 2023–24 fiscal year.
Although last year’s budget had initially projected an additional Rs100 billion in revenue from the salaried class, the FBR now expects collections to exceed Rs550 billion by the end of June 2025—indicating a significant underestimation.
Middle-income earners, particularly those with monthly salaries between Rs200,000 and Rs300,000, have borne a disproportionate share of the burden, with income tax rates climbing to 40% and 45%. Meanwhile, high earners receiving over Rs1 million per month face an additional 10% surcharge on top of their 40% income tax rate—an effective tax regime that many consider excessive and unjustifiable.
The government hopes the proposed relief will address these imbalances and provide some breathing room for salaried individuals who have faced steep increases in tax obligations over the past two fiscal years.
