IMF wants increase in tax on salaried, non-salaried class

The International Monetary Fund (IMF) has put forward a proposal to double the tax burden on salaried and non-salaried classes – a recommendation if accepted, will hurt the middle and upper-middle-income groups.

The global loan lender suggested Pakistan slash the slabs of taxation from seven to four and eliminate the tax exemption from private employers to pensioners. 

The US-based lender made an estimate that if the proposal is implemented fully on income tax, it could boost revenue to 0.5% of GDP, equivalent to Rs500 billion on an annual basis.

So far, FBR collected Rs215 billion from the salaries class in eight months (July to Feb) of the ongoing fiscal year which was lower than the projected tax revenue of Rs300 billion.

Following the IMF’s recommendation, the entity would collect an additional amount of up to Rs500 billion in the account of Personal Income Tax (PIT).

Sources said that the FBR could increase its revenue by removing exemptions and other preferential taxes.

Currently, those who have been earning Rs400,000 or less amount annually fall in the zero tax category of FBR. If annual income exceeds 400,000 to 1,200,000 the person pays a 5% tax on annual income. 

Those who earn from 1,200,000 to 2,400,000, have to pay 15% tax plus Rs160,000 if they slightly cross the limit. The percentage of paying tax extends 5% in every slab.

The IMF also recommended lowering the income limit for higher-rate slabs.