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IMF Urges Pakistan to Increase Taxation by Rs. 1.3 Trillion in Next Fiscal Year

IMF Urges Pakistan to Increase Taxation by Rs. 1.3 Trillion in Next Fiscal Year

The International Monetary Fund (IMF) has proposed that Pakistan increase its tax collection by Rs. 1.3 trillion in the next fiscal year, significantly raising the annual revenue target for the Federal Board of Revenue (FBR) to Rs. 12.3 trillion.

According to reports from Express Tribune, the IMF has recommended that half of these additional taxes be collected from the salaried class and businesses. This suggestion comes from the IMF’s final Tax Diagnostic report shared with the government, which advises streamlining income tax slabs for salaried individuals. However, such a move could significantly raise the tax burden on both salaried individuals and businesses.

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The IMF and Pakistan are expected to discuss these proposed taxes in upcoming talks for a larger loan program. However, these taxes have not yet been confirmed, and the government intends to negotiate with the IMF on this matter. Given that the current fiscal year’s tax collection target of Rs. 9.415 trillion is deemed unachievable, reaching a tax-to-GDP ratio of 10 percent in FY25 would require the tax target to be raised to approximately Rs. 12.3 trillion.

In response to these challenges, the government is exploring various taxation measures for the upcoming fiscal year. These measures include imposing additional taxes on retailers, eliminating sales tax exemptions, and revoking reduced sales tax rates for FBR’s Tier-I retailers.