IMF Suggests Doubling Tax Burden for Salaried and Non-Salaried Classes in Pakistan

 IMF Suggests Doubling Tax Burden for Salaried and Non-Salaried Classes in Pakistan

IMF Suggests Doubling Tax Burden for Salaried and Non-Salaried Classes in Pakistan

The International Monetary Fund (IMF) has proposed doubling the tax burden for both salaried and non-salaried classes in Pakistan, aiming to simplify the tax system and increase revenues.

According to the IMF’s recommendations, the Federal Board of Revenue (FBR) should eliminate distinctions between salaried and non-salaried classes, reduce the number of tax slabs, and eliminate tax exemptions on certain contributions.

Implementation of these recommendations could result in additional revenues of 0.5% of GDP annually, equivalent to approximately Rs500 billion.

Currently, the FBR has collected Rs215 billion from the salaried class in the first eight months of the fiscal year, and it is projected to collect around Rs300 billion by the end of the year. The IMF’s proposal could potentially add Rs500 billion in revenues from both classes.

Tax experts believe that reducing the number of tax slabs may decrease the progressiveness of the tax system, but the IMF suggests lowering the income threshold for higher tax rates.

Additionally, the IMF recommends reviewing certain sections of the Income Tax Ordinance to eliminate preferential treatment for specific sectors and to tax pension contributions or benefits.

Former FBR Member Tax Policy Dr. Mohammad Iqbal emphasized the need for tax deductions against salary income, as done in other countries, to ensure fairness in the tax system.

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