ISLAMABAD: Pakistan is considering tax relief measures for the salaried class and business community in its upcoming budget despite tight fiscal constraints under the International Monetary Fund (IMF) program, officials and industry leaders said on Sunday.
Pakistan is expected to present its annual budget in the parliament on June 5 after approval from the cabinet, amid concerns stemming from the Iran conflict and pressure to meet IMF reform targets.
Tough IMF conditions have forced the Pakistani government to impose heavy taxes on industry and the salaried class. Industry leaders claim that taxes on businesses exceed 60 percent of their income, while the salaried class contributed 352 percent more in taxes than the combined payments of exporters, retailers, wholesalers, and distributors, according to a recent study by Germany’s Friedrich Ebert Stiftung.
“There is a proposal under discussions to give relief to salaried class especially those earing Rs150,000 ($538) to Rs200,000 ($718) per month,” a finance ministry official told Arab News on the condition of anonymity.
“The final decision rests with cabinet which will approve the budget proposals on 5th June ahead of the parliament session.”
He said various suggestions were forwarded by the Pakistani business community for tax relief in the upcoming annual fiscal plan, adding that the final decisions will be taken based on the available fiscal space and revenue requirements.
“These proposals are under consideration on various levels,” the official added. “Obviously, the government wants to give relief to people as it will give it political mileage, but it has to keep in view the annual revenue target set by IMF.”
According to the IMF staff report on Pakistan, the international lender has set an annual revenue target of Rs15.26 trillion ($54.7 billion) for the country’s tax collection agency, the Federal Board of Revenue, to collect in the next fiscal year. Last year, the revenue target was Rs13.97 trillion ($50 billion).
Pakistan’s industries have long complained about a heavy tax regime, which they say has forced several multinational firms in consumer goods, energy, telecom, pharmaceuticals and manufacturing to exit or scale back operations in recent years.
These include Shell, Procter & Gamble, Lotte Chemical and Telenor, while others have shifted operations or shut local manufacturing units amid rising costs, import restrictions and policy uncertainty.
PM TO MEET BUSINESSMEN
Federation of Pakistan Chambers of Commerce & Industry (FPCCI) President Atif Ikram Sheikh said businesses submitted four key tax relief proposals to the government, and a meeting between top industrialists and Prime Minister Shehbaz Sharif is scheduled this week.
“Currently the industry in Pakistan is facing over 60 percent accumulated tax burden on its income,” he said. “We want the government to bring it down to at least 40 percent.”
“We also want the government to abolish super tax, (an additional charge imposed on top of a taxpayer’s normal income tax liability once their income crosses a certain threshold).”
He said export-oriented industries should be brought under the Final Tax Regime (FTR) instead of the National Tax Regime (NTR) introduced in 2024. Under the FTR, exporters would pay a fixed tax deducted at source with limited paperwork whereas the NTR requires exporters to maintain full accounts, prepare balance sheets and comply with documentation at every stage from production to export.
Adviser to Pakistan’s Finance Ministry Khurram Schehzad said he could not comment on the budget before its announcement.
“Everything will be announced in a few days through budget,” he told Arab News.
Pakistan has in recent years grappled with high inflation, shrinking foreign exchange reserves, a weakening currency, rising debt and recurring balance-of-payments pressures, forcing the country for repeated IMF support.
While macroeconomic indicators have improved since securing a Rs1.9 trillion ($7 billion) IMF bailout in 2024, the government remains under pressure to widen the tax base, reduce energy sector losses and maintain fiscal discipline ahead of the next fiscal year’s budget.
