High-income individuals to face 10 per cent tax surcharge

WEB DESK: Pakistan’s government has implemented a 10 per cent surcharge on individuals’ tax liabilities, affecting both salaried individuals and associations of persons (AOP) earning over Rs10 million annually.

This surcharge will be deducted directly from affected employees’ salaries by their employers.

The move follows the passage of a tax-heavy finance bill by Pakistan’s parliament on Friday, ahead of anticipated negotiations with the International Monetary Fund (IMF) for a crucial $6 to $8 billion loan.

The bill aims to bolster Pakistan’s fiscal stance amid economic challenges, including a projected inflation rate of up to 13.5 per cent for June.

Finance Minister Muhammad Aurangzeb introduced the bill, which was subject to parliamentary debate and amendments by the ruling alliance led by Prime Minister Shehbaz Sharif and opposition parties.

Pakistan’s national budget, unveiled on June 12, sets a daunting tax revenue target of Rs13 trillion ($46.66 billion) for the fiscal year starting July 1, marking a significant 40 per cent increase from the current year.

This ambitious target underscores Pakistan’s efforts to secure an IMF bailout and spur economic recovery in the region’s slowest-growing economy.

According to a finance ministry report, the budget aims to foster sustainable and inclusive growth amidst rising inflationary pressures. The projected consumer price inflation for June 2024 is expected to range between 12.5 per cent to 13.5 per cent, up from 11.8 per cent in May.

Key provisions of the budget include a 48 per cent rise in direct taxes and a 35 per cent increase in indirect taxes compared to revised estimates for the current fiscal year. Non-tax revenue sources, such as petroleum levies, are anticipated to surge by 64 per cent.

Certain sectors will face higher taxes, including a proposed 18 per cent tax on textile, leather products, and mobile phones, along with increased taxes on capital gains from real estate transactions. Moreover, workers will experience a rise in direct income taxes.

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