Raising Income Tax Rates from 35% to 45%? Pakistan and IMF disagreed as burden will increase on Salaried Class
Pakistan and the International Monetary Fund (IMF) talked about taxes and energy, last Friday. They couldn’t agree on income tax thresholds, merging salaried and non-salaried rates, or the max tax rate. There’s talk of imposing a hefty 45% income tax on monthly incomes over Pakistani Rs.4,67,000.
Currently, the max rate is 35% for incomes over Pakistani Rs.5,00,000. They do agree on increasing taxes for exporters. Pakistan is considering taxing pensions more, and the IMF wants to merge tax slabs. The government wants to raise the income threshold but not the maximum rate for salaried individuals. They’re open to increasing the max rate for non-salaried individuals to 45%.
Prime Minister Shehbaz Sharif is against further burdening the salaried class. There’s a proposal to increase the taxable income threshold, with higher tax rates for lower incomes, impacting the middle class. Talks are ongoing, with the IMF urging Pakistan to share alternative proposals if it won’t increase taxes on the salaried class. They’ve agreed on changing the tax system for the wealthiest exporters.
The government wants to change the minimum tax rate for exporters from 1% to a higher amount in the next fiscal year. Pakistan’s tax system favours the rich and burdens those with less money. The IMF wants Pakistan to stop special tax rules, like low taxes on stock market gains. They want these gains to be taxed like regular income.
The IMF is pushing Pakistan to tax salaried workers more until they get more taxes from non-salaried business people. In the first 11 months of this year, exporters paid way less tax than salaried workers. Salaried workers paid much more tax this year compared to last year. 223% more tax paid than both exporters and retailers combined. There’s no agreement yet on imposing an 18% sales tax on essential agriculture items like fertilizers and seeds.
The government doesn’t want to tax medicines and medical equipment at 18%, but doing so could bring in more money. Pakistan needs a new loan from the IMF to avoid financial problems. They want to finalize the deal before the end of June.
