IMF Budget Talks May Bring Higher Tax Burden for Salaried Pakistanis

Pakistan is set to begin negotiations with the International Monetary Fund next week for the 2026-27 federal budget, with fresh tax measures and spending controls expected under the ongoing IMF programme.

According to reports, the federal government is seeking IMF approval for reductions in income tax rates for salaried individuals, especially middle-income earners, along with minor cuts in corporate taxes.

Officials are also reviewing proposals to abolish the super tax and withdraw the capital value tax, although final decisions will depend on IMF approval.

An IMF mission is expected to arrive in Islamabad this week for talks focused on introducing nearly Rs. 230 billion in additional tax measures to meet programme targets.

Under the proposed framework, traders with annual sales of up to Rs. 300 million may face an income tax equal to 1 percent of annual turnover.

The IMF is reportedly insisting on a tightly controlled budget, requiring Pakistan to offset any tax relief through alternative revenue measures to maintain collection targets.

The upcoming federal budget is expected to target total tax revenues of around Rs. 15.3 trillion.

Pakistan has also committed to limiting the fiscal deficit to around 3.5 percent of GDP while maintaining a primary budget surplus of nearly Rs. 2.8 trillion under IMF conditions.

Officials said power subsidies are expected to remain capped at around Rs. 890 billion and could face further reductions if demanded by the IMF.

Reports also suggest that a mini-budget may become necessary later in the fiscal year if revenue collection targets are not achieved.

Meanwhile, tax experts have proposed broader structural reforms, including a simplified tax system for salaried individuals and stricter rules allowing authorities to tax undeclared assets when discovered.

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