IMF demands Pakistan to increase taxes on salaried class earning between 51k-100k

The International Monetary Fund (IMF) has proposed to create a single tax system for salaried class and business owners by lowering the income amount at which salaried workers pay the highest 35% tax rate, placing a greater burden on them.

Currently, business owners pay the highest 35% tax rate on income exceeding Rs333,000 per month. In contrast, salaried workers start paying the highest tax rate on over Rs500,000 monthly salary.

The Washington-based money lender also wants to keep the current income level for tax exemption at Rs50,000 per month, rather than raising it.

This would negatively impact lower-middle-class earners who make between Rs51,000 and Rs100,000 monthly. High inflation is already reducing their buying power, and having to pay taxes on top of that would make things even harder for them.

The IMF has also recommended a reduction in the number of tax brackets to a maximum of four.

According to Express Tribune report, removing a tax bracket, either 22.5% or 27.5%, and lowering the income threshold for the highest tax rate (35%) to Rs 333,000 per month could substantially burden middle-class and upper-middle-class earners.

As per the IMF's recommendations, individuals in high tax brackets might end up paying more in taxes than they actually take home.

The global lender's findings revealed that most tax revenue in Pakistan comes from the provinces of Punjab and Sindh. Individual income taxes are the biggest source, with salaried workers contributing a larger portion in Sindh compared to non-salaried class Punjab. 

The IMF's proposed reforms aim to recover Rs650 billion more from people with salaries or business income. This plan would place a heavy burden on these individuals, who already have a fixed income. 

Finance Minister Muhammad Aurangzeb announced that IMF representatives will be in Pakistan within 7 to 10 days to discuss a new long-term program.