IMF demands pension tax on retired government employees

ISLAMABAD: The International Monetary Fund (IMF) has reportedly presented new demands to Pakistan ahead of crucial negotiations set to begin today. Among these demands is the taxation of pensions for retired government employees.

FM Aurangzeb reveals pension reforms ahead of new IMF deal

According to media reports, the IMF seeks additional revenue generation of 0.5 per cent of Pakistan’s Gross National Product (GDP), translating to approximately Rs 600 billion. This revenue is expected to come primarily from taxes levied on salaried individuals and businesses.

The IMF is emphasising the need for Pakistan’s Federal Board of Revenue (FBR) to focus on increasing tax collection. Furthermore, the IMF reportedly advocates for the elimination of tax exemptions currently enjoyed by several pension schemes.

The upcoming negotiations mark the 24th IMF program for Pakistan and are touted as the most challenging to date. Pakistan seeks a two-pronged loan approach: one to support infrastructure reforms and another to address climate change challenges.

IMF likely to demand pension reforms

A key point of contention is the IMF’s proposal to tax retiree pensions. Finance Minister Muhammad Aurangzeb has acknowledged that the final size and duration of the loan program remain undecided, but details are expected to be finalised soon. He also indicated that imposing a tax on pensions and eliminating other benefits could generate an additional Rs 22-25 billion annually for the government. – INP