IMF Wary of Tax Cuts for Middle-Income Earners in Pakistan’s Budget Plan
Pakistan’s 2025-26 Salary Relief Plan May Face IMF Resistance. As Pakistan is finalising its budget for the fiscal year 2025-26, International Monetary Fund (IMF) reportedly raised concerns over the government’s proposal to reduce tax rates for the salaried class.
The objection comes amid ongoing talks to generate an additional Rs700 billion in tax revenue through several measures. As per reports, Sharif-led government sought IMF approval to rationalize tax rates for different sectors, including salaried individuals, tobacco, and beverages.
IMF however is particularly wary of suggested cuts for those earning between Rs2-4Lac monthly, fearing that these reductions could negatively impact expected revenue collections. US-based lender also questioned projected increase in tax revenue if the rates for the middle-income salaried class were lowered. Officials are reportedly pushing for clarity on how such tax cuts align with the broader revenue targets and fiscal discipline.
The issue is bone of contention for two sides in bid to finalise the macroeconomic framework and budget proposals in the coming weeks. The Annual Plan Coordination Committee (APCC) is set to meet soon to recommend the budget framework to the National Economic Council.
While the government projects revenue collection of Rs13,556 billion, IMF’s estimate is lower at Rs13,200 billion, highlighting the challenges in reaching consensus. To meet the targeted revenue of Rs14,307 billion, additional taxation and stricter enforcement are being considered.
This development indicates growing tension between the government’s attempts to provide tax relief to the salaried class and the IMF’s insistence on maintaining robust revenue targets to stabilize Pakistan’s economy.
