Govt proposes up to 10% tax cut for salaried class

ISLAMABAD: The government has shared some headlines of the proposed taxation measures with the IMF for the upcoming budget for 2025-26, including a reduction in the tax burden of salaried class up to 10 percent in different income slabs.

The proposed reduction in tax rates, if agreed by the IMF in different income slabs of the salaried class, might bring relief up to Rs50 billion for them in the next budget.

The IMF team and the Pakistani side will kick-start parleys on finalizing the upcoming budget for 2025-26 this week from May 14 to 22, 2025. However, the venue of the meeting is yet to be finalized.

“To kick-start the economy, the government has shown its willingness to take additional taxation measures to match the revenue losses that will be incurred for providing the relief measures in the upcoming budget. The IMF team will discuss these proposed measures in the upcoming parleys,” top official sources confirmed while talking to The News here

on Sunday.

The Pakistani team, the sources said, wants negotiations only to fill the gap that will occur on account of the provision of some relief. For instance, in the case of salaried class, the FBR has proposed a reduction in tax rates of Rs50 billion, so this gap will be filled with some other taxation measures.

In the first ten months (July-April) period, the salaried class paid out more than Rs450 billion in taxes, which is much higher than retailers and exporters. The salaried class had paid out Rs368 billion in the whole last fiscal year 2023-24.

On the eve of the last budget, it was communicated that the increased tax burden on the salaried class would cough up additional Rs100 billion in the national kitty. But in reality, the FBR has envisaged an additional Rs225 to Rs250 billion from the salaried class in the current fiscal year. It is estimated that the salaried class would pay a tax amount of Rs550 billion till the end of June 2025.

The payment of taxes for middle-income earners witnessed a phenomenal increase for monthly income earners in the range of Rs0.2 to Rs0.3 million. The income tax rates went up to 40 and 45 percent.

For higher income earners getting more than Rs1 million salary per month, there is a 10 percent surcharge over and above their 40 percent tax rates, which cannot be justified at all. One higher-income bracket earner told The News that it seemed that they were getting higher salaries only for giving increased tax amounts. “Earning higher income is treated as a sin in our country,” he said, and added that if these tax rates were not revised downward, there would be no other choice but to re-negotiate with our paymasters and convince them to give a certain portion of salary in cash.

When contacted, FBR’s official spokesman on Sunday replied that different proposals were still under internal discussion related to salaried class.