Mohsin Siddiqui (Chief Reporter)

The International Monetary Fund (IMF) has recommended Pakistan to levy additional taxes amounting to around Rs1.3 trillion in the upcoming budget, potentially raising the Federal Board of Revenue’s (FBR) annual target to a staggering Rs12.3 trillion.

This proposed Rs1.3 trillion tax hike represents approximately 1% of the projected size of next year’s economy. The IMF suggests recovering half of these additional taxes from both salaried individuals and businesses, government

The IMF has shared its final Tax Diagnostic report with the government, retaining recommendations aimed at streamlining income tax slabs, potentially increasing tax burdens on salaried and business .

Negotiations regarding the IMF’s demand for additional taxes, amounting to around Rs1.3 trillion or 1% of GDP, are expected during the forthcoming mission-level talks for the next bailout package.

While the IMF’s demand is not finalized, the government intends to negotiate with the lender, particularly concerning the proposed additional burden on the salaried class.

Recent internal discussions on the fiscal year 2024-25 budget have commenced in light of the impending IMF visit, as the government has been notified of the unattainability of the current fiscal year’s Rs9.415 trillion tax collection target.

Tax authorities have informed Finance Minister Muhammad Aurangzeb of potential areas for increased taxation in the next fiscal year, including greater taxation on retailers, withdrawal of sales tax exemptions, and the elimination of reduced sales tax rates for FBR-registered businesses through point of sale (POS).

Despite economic challenges and inflation, the government is considering tax policy adjustments to meet revenue targets, emphasizing the need to broaden the tax base and expedite FBR digitization processes.

Muhammad Aurangzeb, in a meeting with a foreign bank delegation, reiterated the importance of tax base expansion and FBR digitization, as per the finance ministry.