Pakistan has decided to approach the IMF regarding the abolition of the super tax. IMF approval is being sought after Prime Minister Shehbaz Sharif greenlit proposals to end the super tax and reduce the income tax rate for salaried people by 5%, according to sources familiar with the discussions.
Express Tribune Pakistan reported that the prime minister chaired a meeting on Saturday and directed tax authorities to fine-tune the proposals with private-sector consultants before presenting them to the IMF next week for endorsement.
If cleared, the move would offer relief to salaried taxpayers who have faced a rising share of the direct tax burden in recent years.
Sources said the government wants to abolish the super tax on wealthy individuals and the corporate sector, subject to IMF consent.
Another proposal would reduce the maximum income tax rate for the highest-salaried income group by 5%, from 30% to 25%, while also increasing the slab threshold at which the new top rate would apply.
Read: FBR Tax Shortfall July–February Reaches Rs429 Billion
The government had earlier aimed for large-scale tax relief in the range of Rs1.5 trillion to Rs1.8 trillion, but sources said it is unlikely the IMF would allow that much space, especially as the Federal Board of Revenue (FBR) struggles to meet targets.
Sources said the government also cleared a proposal to reduce the 1% deemed income tax on the property sector, which is currently being challenged in court.
It is also considering abolishing the 1% advance income tax on exports, subject to IMF approval, and removing the capital value tax on foreign assets, according to the report.
Plans to reduce the sales tax to 15% and cut corporate income tax to 25% were discussed earlier, but the report says these two proposals may be deferred.
Why Salaried Tax Relief Is Back in Focus
Provisional FBR data cited in the report show that salaried individuals paid Rs315 billion in income tax during July–January of the current fiscal year, up by Rs30 billion (10.5%) from Rs285 billion in the same period a year earlier.
The report also says taxes paid by salaried people remained more than double those paid by the real estate sector over the same period, reinforcing concerns about an uneven burden.
A paper by economist Sajid Amin referenced in the report argues that those with the power to stay outside the tax net often do, while salaried taxpayers and manufacturers carry much of the load.
Sources said the IMF has expressed dissatisfaction with FBR performance. The report notes that the IMF previously reduced the annual tax collection target by Rs216 billion to Rs13.9 trillion, and that the FBR has now sought a further reduction of Rs430 billion.
The report adds that the FBR wants a revised target of Rs13.5 trillion, while internal estimates suggested collection may not exceed Rs13.2 trillion.
To help close the fiscal gap, the finance ministry was also hoping to raise Rs150–200 billion from the petroleum levy, with the report stating the levy on petrol rose to Rs106 on Friday.
