ISLAMABAD: Pakistan and the International Monetary Fund (IMF) are nearing an agreement on a proposal to ease the tax burden on the salaried class in the upcoming 2025–26 federal budget.
The development comes amid challenges in meeting the ambitious revenue target of Rs14.2 trillion for the next fiscal year, especially as the country grapples with a growing shortfall against the revised Rs12.33 trillion tax collection goal for the current year.
Following late-night talks on Friday, the IMF gave preliminary approval to reduce income tax rates across several salary brackets. The proposed cuts are expected to provide relief worth an estimated Rs56–60 billion in the next fiscal year. To offset this gap, the Federal Board of Revenue (FBR) is preparing to introduce compensatory tax measures.
“We have proposed certain taxation measures to satisfy the IMF while offering relief to the salaried class in the coming budget,” a senior official involved in the negotiations confirmed.
As part of the proposal, the FBR has suggested lowering the tax rate for the first income slab (Rs600,000–Rs1.2 million annually) from the current 5% to just 1%. This would reduce the tax burden from Rs30,000 to Rs6,000 for individuals earning up to Rs100,000 per month. The IMF, however, is pushing for a slightly higher rate of 1.5%, which would translate to a Rs9,000 tax bill for the same income group.
For higher income brackets, a 2.5% reduction in each tax slab is under consideration, with the top tax rate expected to decrease from 35% to 32.5%. Final figures are still being reconciled between the IMF and FBR.
Regarding the 10% income surcharge and Super Tax, sources said both would be gradually rationalised, with reductions starting in the next fiscal year.
Officials also voiced concern over a proposed tariff rationalisation plan on imports, which could cost the government up to Rs200 billion in lost revenue. While the Commerce Ministry argues that lowering tariffs would stimulate economic activity and boost overall revenue, the FBR fears it could encourage misdeclaration of goods and undercut customs collections.
Internal estimates suggest revenue losses could still stand at Rs150 billion if tariff cuts go ahead. FBR officials worry that next year’s revenue target may be based on flawed assumptions, especially given that the shortfall in the current year has already surpassed Rs1 trillion compared to the original target of Rs12.97 trillion.
The IMF also raised red flags over a government plan to allocate 2,000MW of electricity for cryptocurrency mining — reportedly done without prior approval from the Energy Ministry or the National Electric Power Regulatory Authority (NEPRA).
As budget talks continue, both sides are working to balance the IMF’s fiscal expectations with political pressure to deliver relief to overburdened taxpayers.
