IMF Supports Tax Cut for Salaried, Rejects Wealth Levies

The International Monetary Fund (IMF) has dismissed Pakistan’s latest efforts to introduce a capital value tax on movable assets such as “cash” and “gold,” as well as a 5 percent federal excise duty (FED) on “one-day-old chicks.” The IMF argued that the government’s focus should remain on taxing income instead of wealth.

The proposed poultry tax also failed to gain traction. The IMF criticized the idea for lacking comprehensive sectoral analysis and contradicting claims about high food taxes, marking it as an inconsistent policy move.

While the IMF rejected several proposals, it approved the introduction of a digital services tax aimed at generating Rs. 10 billion in revenue. Additionally, it endorsed reductions in income tax rates for those earning below Rs. 500,000 per month.

However, Pakistan’s request to raise the tax exemption threshold to Rs. 1.2 million was not accepted. The IMF also refused any relief for individuals in the highest tax bracket of 35 percent or for the 10 percent surcharge imposed on those with monthly incomes exceeding Rs. 500,000.

Other Fiscal Adjustments Under Review

The government is considering several other tax revisions, including:

• Raising the dividend income tax on mutual funds from 15 percent to 20 percent
• Increasing the withholding tax on interest income from 15 percent to 20 percent
• Withdrawing income tax exemptions for venture capital firms and cinemas

In another potentially burdensome move, a 5 percent excise duty on processed foods such as chips and biscuits has been proposed. Factoring in existing taxes, this would raise the total effective tax burden in the processed food sector to around 29 percent.

Despite resistance from the Prime Minister, the IMF is pressuring Pakistan to double the excise duty on fertilizer to 10 percent and to impose a 5 percent duty on pesticides. These suggestions highlight the IMF’s continued push for revenue-generating reforms across all economic sectors, even those considered politically sensitive.