IMF urges Pakistan for Rs1.3trn in additional taxes

The International Monetary Fund (IMF) has recommended Pakistan implement additional taxes of around Rs1.3 trillion in the upcoming budget. 

As per a news report, these potential taxes will raise the Federal Board of Revenue’s (FBR) annual target to Rs12.3 trillion.

Half of the proposed additional taxes are suggested to be recovered from salaried and business individuals.

The IMF’s final Tax Diagnostic report includes a recommendation to reduce the number of income tax slabs for salaried individuals to four, which could significantly increase the tax burden on this group, if accepted by the government.

Discussions on the IMF’s demand for the Rs1.3 trillion new taxes, equivalent to 1% of GDP, are expected during the upcoming mission-level talks with the IMF for the next bailout package.

The government plans to negotiate with the IMF, especially regarding the impact of additional tax burdens on the salaried class, which has already been stretched thin financially.

Authorities have begun internal discussions on the fiscal year 2024-25 budget in anticipation of the IMF’s visit, acknowledging that the current fiscal year’s tax collection target of Rs9.415 trillion is likely unattainable.

Challenges such as taxes stuck in courts and ongoing debates over tax collection strategies, including potential increases from retailers and changes in sales tax exemptions, are key areas under consideration for the next fiscal year.