As Pakistan moves closer to finalizing its 2025–26 budget, the International Monetary Fund (IMF) has reportedly expressed reservations about the government’s plan to reduce income tax rates for the salaried class.
The disagreement arises during ongoing negotiations aimed at boosting tax revenues by Rs700 billion through various fiscal measures. The government, under Prime Minister Shehbaz Sharif, has requested IMF approval to revise tax structures across several sectors, including salaried employees, tobacco, and beverages.
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However, the IMF is particularly concerned about proposed tax cuts for individuals earning between Rs200,000 and Rs400,000 per month. The organization fears these reductions could hamper overall revenue collection and questions how the government plans to offset any potential shortfall. It is also seeking clarification on how these tax breaks fit within broader fiscal goals.
This taxation issue has become a key sticking point as both sides attempt to finalize the macroeconomic and budgetary framework. The Annual Plan Coordination Committee (APCC) is expected to meet soon to recommend the final structure to the National Economic Council.
While the government anticipates revenue collection of Rs13,556 billion, the IMF projects a lower figure of Rs13,200 billion. To bridge this gap and meet the Rs14,307 billion target, the government is considering new taxes and enhanced enforcement strategies.
The situation underscores the growing strain between Pakistan’s aim to ease the burden on its salaried middle class and the IMF’s insistence on stringent revenue measures to maintain economic stability.
