IMF Opposes Tax Relief for Salaried Class in FY26 Budget

The International Monetary Fund (IMF) thinks the Federal Board of Revenue (FBR) has proposed too high tax relief for salaried class in upcoming budget. The IMF rejected Pakistan’s argument that high tax rates lead to low revenues and advised authorities to follow its expert recommendations instead of citing local ground realities. It also questioned the Revenue Division’s proposal to ease taxes on salaried individuals, reported Express Tribune. Pakistan had proposed increasing the annual tax exemption threshold from Rs. 600,000 to Rs. 1.2 million and introducing new slabs at 10 percent, 25 percent, 33 percent, and 35 percent, while raising income brackets. The IMF has opposed this. The IMF mission chief Nathan Porter has listed four priority areas: achieving the Rs. 14.307 trillion tax target, recalibrating NFC transfers without constitutional change, cutting government size, and advancing privatization. After discussions with IMF, there is limited scope to support real estate. A proposal seeks to reduce withholding tax on property transactions by 0.5 percent each. The Federal Board of Revenue (FBR) wants this treated as final tax, but the finance minister prefers keeping it adjustable. The government also discussed reducing the 18 percent sales tax on packaged milk to 15-17 percent, but no decision was taken. A proposed federal excise duty on biscuits was also debated, but no consensus was reached. Meanwhile, discussions continue on withdrawing the tax-free status of ex-FATA. The IMF team, currently holding virtual talks from Turkey, will arrive in Islamabad next week. Final budget discussions will conclude on May 23.