Pakistan Gains IMF Nod to Cut Tax Burden on Salaried Class

Pakistan has received preliminary approval from the International Monetary Fund (IMF) to reduce income tax rates for salaried individuals in the upcoming 2025-26 federal budget.

The breakthrough emerged after an intense round of negotiations on Friday night between the Federal Board of Revenue (FBR) and IMF officials. Moreover, the two sides reached a broad consensus to lower income tax rates across various salary brackets. This adjustment could provide financial relief worth Rs. 56–60 billion in the next fiscal year.

One of the most notable proposals is a reduction in the tax rate for the first income slab, covering annual earnings between Rs. 0.6 million and Rs. 1.2 million. The FBR suggested slashing the tax rate from 5 percent to 1 percent, which would reduce the annual tax from Rs. 30,000 to Rs. 6,000 on an income of Rs. 100,000.

However, the IMF prefers a “compromised rate” of 1.5 percent, which would set the payable tax at Rs. 9,000. Discussions are ongoing to finalize the exact figures.

The FBR has also proposed trimming 2.5 percent from each subsequent income slab. Additionally, the top income tax rate may be lowered from 35 percent to 32.5 percent. These changes are still under technical review, with final numbers yet to be agreed upon.

Beyond income tax, the IMF is advocating for a “gradual rationalisation” of the 10 percent surcharge and Super Tax, indicating a shift towards a more sustainable taxation framework.

In a separate development, the IMF criticized Pakistan’s decision to allocate 2,000MW of electricity for cryptocurrency mining. The move was reportedly made without prior consultation with the Energy Ministry and NEPRA. The lender has expressed concern over the lack of regulatory oversight in this matter.