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Government Contemplates Scaling Back Income Tax Hike Amidst Criticism

The government of Pakistan is considering scaling back its ambitious tax proposals in response to widespread public outcry and opposition from various sectors, particularly concerning income tax increases for salaried individuals.

The move follows significant backlash against fiscal measures aimed at generating an additional Rs 1.5 trillion in revenue for the upcoming fiscal year. The Finance Ministry, headed by Muhammad Aurangzeb, has initiated internal discussions amid concerns from taxpayers and businesses. The proposed budget of 18.9 trillion rupees represents a 30% increase over the current fiscal year but has faced criticism for relying heavily on tax hikes rather than expenditure cuts.

Prime Minister Shahbaz Sharif has been urged by Finance Minister Aurangzeb to reconsider the heavy tax burden on the salaried class, which contributed 360 billion rupees this year alone. Despite efforts to reduce this burden by 240 billion rupees, an additional 75 billion rupees in income taxes is planned for the upcoming year.

Exporters, traditionally taxed at a fixed rate of 1%, are also set to face gradual increases under the new proposals, sparking concerns about Pakistan’s export competitiveness amid global economic uncertainties.

Contentious proposals like an 18% sales tax on baby milk have ignited fierce debate, with stakeholders warning of potential price spikes that could strain consumers already grappling with rising costs.

The Standing Committee on Finance, chaired by Senator Saleem Mandviwala, has emerged as a vocal opponent of these tax hikes, urging a thorough review of the budgetary proposals, especially those impacting vulnerable groups and essential goods consumers.

Chairman of the Federal Board of Revenue (FBR), Malik Amjad Zubair Towana, has shown willingness to reconsider the proposed sales tax on baby milk, suggesting a phased implementation instead. Industry leaders emphasize the hardships an immediate tax hike could impose on Pakistani families.

Meanwhile, the government’s decision to grant Pakistan International Airlines a 10-year deficit adjustment plan has drawn criticism from opposition figures like Senator Mohsin Aziz of Tehreek-e-Insaf, who raise concerns about transparency and fiscal accountability.

In addition to tax revisions, the government has proposed stringent measures such as banning non-filers from traveling abroad to expand the taxpayer base and boost revenue collection.

As consultations continue, the fate of these tax revisions hinges on Pakistan’s financial capabilities and its commitments under the International Monetary Fund’s program, highlighting the delicate balance between fiscal consolidation and public sentiment.

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