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Reading: Government to Revoke Tax Concessions for High-Earners, IMF Advises Reforms
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Bank Tax Restructure in Pakistan
PhotoNews Pakistan > Business > Government to Revoke Tax Concessions for High-Earners, IMF Advises Reforms
Business

Government to Revoke Tax Concessions for High-Earners, IMF Advises Reforms

Web Desk
By Web Desk Published May 28, 2024 3 Min Read
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Tax Reforms. Photo: The News International
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According to the government, there are plans to revoke tax concessions favouring high-earners over the middle class.

The IMF advised the government to treat salaried incomes like non-salaried personal incomes. The FBR disagrees, arguing the incomes differ.

If salaries are treated as personal incomes, the tax burden on the salaried class will rise significantly.

The revenue measures for the 2024-25 budget total Rs500 billion. The final amount depends on IMF projections. Unlike before, the Ministry of Finance now handles tax calculations.

FBR aims to raise Rs500bn more in 2024-25.

FBR forecasts revenue collection will exceed Rs1,150 trillion in FY25, considering GDP growth and inflation. The federal government will consult the IMF on revenue measures. In the last budget, revenue measures totalled Rs415bn. FBR suggests raising the salaried class tax exemption to Rs1.2m in 2024-25.

However, this might be reduced to Rs900,000 from Rs600,000 due to inflation.

The FBR discussed pension tax with the IMF. The IMF wants salary slabs matched to pension incomes. The FBR’s focus is on federal pensions, estimated at Rs700bn. FBR opposes salary slabs for pensions and suggests an alternative tax mechanism for wealthy pensioners. The finance ministry is in discussions with the IMF on pension tax changes. FBR sees no revenue impact from taxing pensions.

Exemption eliminations will be consulted with the IMF. The FBR provided data on potential revenue post-exemptions. The IMF asked FBR to tax traders and wholesalers who are not contributing.

There has been no agreement on increasing import tariffs. The IMF focuses on sales and income taxes, especially withholding taxes. Sales tax exemptions exceed Rs1.2 trillion. The government must decide to revoke food exemptions, international agreements, and pharmaceuticals. Items like insecticides and solar panels may face sales tax.

The government plans to raise existing withholding tax rates and introduce new ones, such as a revived tax on bank cash withdrawals. The finance ministry may tax exempted raw material imports and increase existing raw material tax rates.

The PTI government removed raw material taxes to boost exports and industrialization.

TAGGED:FeaturedPak­istan
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