IMF seeks more taxes from salaried individuals

ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan to tax the salaried and business individuals at a single income threshold by lowering the highest taxable income limit of the salaried people, which will result in charging a 35 per cent income tax rate at a monthly income of Rs333,000.

At present, business individuals are charged the 35 per cent rate at Rs333,000 monthly income while the salaried persons’ highest tax rate starts at over Rs500,000 per month salary, according to a report published in The Express Tribune .

The global lender has also demanded to retain the current income-tax exemption threshold at Rs50,000 monthly income instead of further relaxing it. This will adversely hit the lower middle-income groups earning from Rs51,000 to Rs100,000 a month whose purchasing power has significantly eroded due to constant double-digit inflation.

In its set of recommendations for the budget 2025, the IMF has also asked Pakistan to withdraw all income tax credits and allowances particularly available to teachers and researchers. It wants an end to an education expense allowance and workers’ welfare fund-related tax credits.

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These recommendations are part of the IMF’s plan to recover about Rs650 billion additional from salaried and business-income individuals –in a move that would further crush these fixed-income people.

Finance Minister Muhammad Aurangzeb said that the IMF mission would arrive in Pakistan in the next 7 to 10 days for negotiations for a new and long-term programme.

However, Pakistan needs to deal with the IMF firmly, as any acceptance of these demands may create problems for the government as well as for the people. If the government accepts these recommendations, it may create unease among the salaried persons, particularly at a time when the PML-N government is going soft on the retailers.