IMF requests Pakistan to increase income tax

The International Monetary Fund (IMF), has requested Pakistan to impose income taxes in the amount of 225 billion Pakistani Rupees. The Express Tribune reported that this was to question the sustainability and revenue performance of Pakistan’s import-control policy shift.

According to the report, the IMF plan aims to reduce income tax slabs as well as withdraw income tax exemptions that are currently granted under the second Schedule of the Income Tax Ordinance. This includes pensioners.

Sources said that the Fund also requested the withdrawal of sales tax exemptions for those whose revenue impact exceeds 225 billion PKR. They added that the final decision on whether to accept or refuse the demands would be made during policy level negotiations with the IMF, which began in Washington on October 13.

The IMF pressed Pakistan to raise electricity prices during the technical talks. This was in response to quarterly and annual adjustments to tariffs.

Surprised by the demand for higher taxes, especially after the FBR exceeded its first quarter target for tax collection by 187 billion PKR. This has placed it in a position to reach the annual target of 5.829 Trillion PKR.

According to the report, the IMF asked Pakistan to raise the personal income tax rates of the salaried and the individuals through reducing the number of tax slabs. It also requested that the authorities withdraw the exemptions from sales tax.

According to sources, the IMF stated that the majority of salaried workers were paying taxes which were lower than their income.

A commitment made by Pakistan in April stated that the government would reduce the number of income taxes slabs to five, and will rationalise income tax rates for salaried workers and business people starting July.

Shaukat Tarin, Pakistan’s Finance Minister, refused to comply with this demand.

Sources claimed that the IMF was not satisfied with the FBR tax collection quality and doubted that the healthy trend of imports would continue.