Govt Eyes Rs. 30 Billion Extra Taxes Before Approving New Budget

The federal government is considering either imposing additional taxes of Rs. 30 billion or making equivalent spending cuts to ensure the budget for FY2025–26 meets the International Monetary Fund’s (IMF) requirements, as final approval from the National Assembly approaches next week. Prime Minister Shehbaz Sharif has directed the Federal Board of Revenue (FBR) to lower the income tax rate for the first salaried slab (Rs. 600,000 to Rs. 1.2 million annually) from 5 percent to 1 percent. Earlier, during the federal cabinet meeting on June 10, the rate was revised to 2.5 percent to partly offset the fiscal impact of a 10 percent salary increase for public sector employees. This increase added Rs. 29–30 billion to expenditure. The temporary 2.5 percent rate was projected to recover Rs. 9.5 billion through higher income tax collections. However, the IMF has been firm on keeping budgetary numbers intact. While the FBR presented the 2.5 percent slab before the Senate Finance Committee earlier this week, the PM has ordered maximum relief to low-income earners. The government now faces a critical decision: introduce further revenue measures or scale back salary increases or other expenditures. Ongoing discussions with the IMF are focused on resolving these remaining issues before the budget is passed.