Islamabad: Pakistan and the International Monetary Fund (IMF) appear to be converging on a consensus to offer income tax relief to the salaried class in the upcoming federal budget for 2025-26, sources confirmed on Saturday.
The IMF has, in principle, allowed a reduction in tax rates across various income slabs, with an estimated relief package of PKR 56–60 billion. However, the Federal Board of Revenue (FBR) is under pressure to introduce countermeasures to offset this revenue shortfall in a bid to meet the next fiscal year’s ambitious tax target of PKR 14.2 trillion.
During late-night discussions between IMF officials and FBR on Friday, the Fund reportedly accepted a proposal to reduce the tax rate in the first slab for salaried individuals earning between PKR 0.6 million and PKR 1.2 million annually. The current 5% tax may be slashed to either 1%—as suggested by Pakistan—or 1.5%, as the IMF prefers.
For instance, under the existing regime, individuals in the first slab pay PKR 30,000 annually. A 1% tax rate would bring this down to PKR 6,000, while a 1.5% rate would reduce it to PKR 9,000.
Additionally, the government is considering a 2.5% cut across all higher slabs, with the top rate possibly dropping from 35% to 32.5%. Final figures are still being negotiated.
Despite the apparent IMF support for tax relief, budget planners face multiple hurdles. The FBR is already struggling to meet its downward-revised target of PKR 12.33 trillion for the current fiscal year, having missed the original PKR 12.97 trillion mark by over PKR 1 trillion in the first 11 months. Any further tax relief could widen the gap unless new revenue streams are introduced.
Sources also revealed tension over a proposed tariff rationalisation plan by the Commerce Ministry and National Tariff Commission, which could slash import duties and cost the exchequer another PKR 150–200 billion. While the government argues that this would stimulate economic activity and eventually improve revenue collection, the FBR has expressed concern about potential misdeclarations in customs due to lower duties on imported goods.
Meanwhile, the IMF has also raised objections to Pakistan’s plan to allocate 2,000 MW of electricity for cryptocurrency mining without prior clearance from the Energy Ministry or the National Electric Power Regulatory Authority (Nepra). With less than a month left before the budget announcement, Pakistan’s economic managers are navigating a tightrope between fiscal discipline and public relief, under the watchful eye of the IMF.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
