IMF opposes tax cuts for salaried individuals

As virtual negotiations between the Finance Ministry of Pakistan and the International Monetary Fund (IMF) continue, sources have revealed that the IMF has raised concerns regarding the government’s proposal to reduce tax rates for salaried individuals.

According to insiders, the IMF cautioned that such a measure could exacerbate the country’s existing tax gap, especially at a time when revenue collection remains below targets.

The government had floated the idea of offering tax relief to the salaried class, but the IMF reportedly responded with reservations, emphasizing the need for broadening the tax base instead.

The Federal Board of Revenue (FBR) is expected to fall short of its annual tax target, with estimates suggesting collections may not exceed Rs13,200 billion this fiscal year. In light of this, the IMF has urged Pakistan to boost revenue by at least Rs70 billion through enhanced enforcement and compliance measures.

Finance Ministry officials have clarified that no final decision has been made regarding tax cuts for salaried individuals, and further discussions are planned in the coming rounds of talks.

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In parallel, the IMF has made other recommendations and approvals in recent months, including:

A proposed increase of Rs47 per litre in motor spirit and high-speed diesel prices based on the application of the standard 18% sales tax.

A 2% reduction in withholding tax on property purchases, which was approved in April.

Calls for urgent cost-cutting measures and the presentation of a comprehensive revenue strategy to address the looming fiscal gap.

The IMF continues to support Pakistan’s economic recovery efforts but has underscored the importance of fiscal discipline, structural reforms, and improved tax administration to ensure long-term sustainability.