ISLAMABAD: The International Monetary Fund has urged Pakistan to implement fresh taxes amounting to Rs1.3 trillion in the upcoming budget for 2024-25 as part of the country’s efforts to secure a new bailout package and support its economic reforms.
If approved, this would raise the Federal Board of Revenue’s (FBR) annual target to Rs12.3 trillion for 2024-25. From July 1, 2023 to mid-February 2024, the tax authority collected Rs5.15 trillion, marking a 30 per cent increase compared to the same period of FY23.
The IMF is reportedly pushing for half of these additional taxes to be recovered from salaried individuals and businesses.
The IMF has provided its Tax Diagnostic report to the government, recommending reducing the number of income tax slabs for salaried individuals to four, which could significantly increase the tax burden on them and businesses.
Discussions on the IMF’s demand for additional taxes will occur during the upcoming mission-level talks for the next bailout package, with a focus on minimizing the burden on the salaried class.
An IMF mission is set to visit Pakistan in coming weeks to discuss a programme ahead of Islamabad beginning its annual budget-making process for the next financial year.
Finance Minister Muhammad Aurangzeb, in a recent interview expressed hopes of outlining a new IMF loan agreement in May, with Pakistan expected to seek at least $6 billion and additional financing from the Fund under the Resilience and Sustainability Trust.
The imposition of excessive taxes on the salaried class has caused financial strain, leading to a need for expense rationing among the middle-class segment.
However, it’s noted that the IMF’s demand is not final, and the government has initiated internal discussions on the budget for fiscal year 2024-25 in preparation for the IMF visit. Additionally, the current fiscal year’s tax collection target of Rs9.415 trillion is no longer achievable.
Authorities have begun internal discussions on the budget for fiscal year 2024-25 in light of the IMF visit, acknowledging that the current fiscal year’s tax collection target of Rs9.415 trillion may fall short by around Rs175 billion to Rs200 billion due to legal challenges against various taxes.
Nearly half of the Rs 415 billion additional tax measures implemented in the previous budget are currently held up in courts, affecting the budget-making process negatively.
I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.
