Pakistan is left with no option but to consider bringing changes to the new income tax slabs for the salaried class under budget FY2022-23 after receiving objections from the International Monetary Fund (IMF).
Reliable sources confirmed with ProPakistani that the proposed tax cut in Personal Income Tax (PIT) of Rs. 47 billion is completely unacceptable to the IMF.
The IMF expressed its reservations about the proposed income tax rates which would allow the Federal Bureau of Revenue (FBR) to grant relief to individuals earning up to Rs. 1,200,000 per year.
The lender wants the coalition government to limit tax cuts to people earning up to Rs. 200,000 per month and divert relief toward the urban and middle-class citizens, and subsequently raise tax rates across all brackets.
The agency’s Resident representative for Pakistan, Esther Perez Ruiz, told Reuters that the “preliminary estimate is that additional measures will be needed to strengthen the budget and bring it in line with key program objectives”.
Under the Finance Bill 2022, the FBR revised upward the limit of the taxable ceiling from Rs. 600,000 to Rs. 1,200,000, and the number of slabs was reduced from 12 to 7 under the proposed regime.
The only way out of the IMF deadlock would be to make adjustments to the proposed slabs since that would be a key component of reaching an agreement with the global agency. Experts suggest that assistance should be limited to individuals earning up to Rs. 200,000 per month.