IMF Recommends Pakistan To Raise Taxes To Generate More Revenue: Report

The IMF projected that if Pakistan is able to fully implement its recommendations regarding Personal Income Tax, it could generate extra revenues around 0.5 per cent of the GDP

The International Monetary Fund suggested multiple measures for Pakistan to help generate more revenue for the economic crisis hit government, a local media report said on Saturday. The global lending body recommended the country undertake measures like lowering tax slabs, raising taxes, and removing tax exemptions for private employers’ contributions to pensioners to help the government yield additional revenues. 

The IMF also projected that if Pakistan is able to fully implement its recommendations regarding Personal Income Tax, it could generate extra revenues around 0.5 per cent of the GDP, reported The News International. The report noted that this amount would come up to Pakistani Rs 500 billion annually.

Further, it added that these recommendations from the global lender for the Federal Board of Revenue (FBR) would almost double the tax load for the salaried and non-salaried classes, and would also leave an impact on the middle and upper middle-income groups. 

 Notably, the FBR so far has garnered Pakistani Rs 215 billion in the July-February period of the current fiscal year from the salaried section of the society. “It is estimated that the FBR could fetch approximately Pakistani Rs 300 billion from the salaried class, and the IMF’s recommendation on personal income tax could bring additional revenues of Pakistani Rs 500 billion from both salaried and non-salaried classes,” reported PTI citing the Pakistani media agency.

The IMF has also suggested Pakistan decrease the income ceiling for the higher rates slabs. It has urged the FBR to examine the Second Schedule and Chapter III of the Income Tax Ordinance (ITO) to remove any preferential treatment given to employees in certain sectors, the deduction for mortgage payments, tax cuts for full-time teachers and researchers, along with keeping the zero rate threshold at the same levels if it can’t reduce it altogether. 

Notably, Pakistan remains completely dependent on the global lender and is currently seeking the last tranche worth $1.2 billion of the overall loan package of $3 billion. The country has so far received two loan tranches from the IMF and is expected to receive the last by March end or early April.