In a punitive financial measure, cash-strapped Pakistan on Friday hiked the taxation rates for the salaried working-class population to meet the demands of the International Monetary Fund (IMF) that withdrew relief granted on June 10. As Islamabad’s economy struggles due to the exorbitantly high global inflation, Pakistan’s newly elected Prime Minister Shehbaz Sharif increased the Federal Board of Revenue (FBR’s) collection target to Pakistani Rs 7,470 billion, and collected tax amount of Rs 80 billion in its currency on Personal Income Tax (PIT), according to Geo News.
Worsening the woes of the middle-class salaried citizens, the government in Pakistan abolished tax relief of Rs 47 billion which helped raise the tax amount to Rs 35 billion overall. It plans to collect Rs 235 billion from the salaried class in the next Budget as opposed to the amount of Rs 200 billion that was generated in the outgoing fiscal year.
Pakistan’s Ministry of Finance announced on June 25 that all of the IMF’s demands on the fiscal front “were almost fulfilled.” Sharif’s government now expects the fund staff to dispatch the draft of the Memorandum of Financial and Economic Policies (MEFP) as early as next week. It also has plans of hiking power tariffs, and the subject may have been brought up at an emergency meeting chaired by Pakistani Finance Minister Miftah Ismail, as per the Geo News report.
“Fund has objected to the government’s estimates of allocating Rs 225 billion for Price Differential Claims (PDCs) for the next budget as the IMF assessed that it might escalate to over Rs 350 to Rs 450 billion,” Pakistan’s broadcaster reported.
One-time tax levied at a rate of 2% of income by Pakistan’s Finance Ministry
The IMF’s demands scrambled the Pakistan government to take some drastic measures such as rampantly increasing the tax rates on high-income earners with an aim to collect Rs 120 billion for poverty alleviation from the citizens. The latter is a one-time tax that was levied at a rate of 2% of the income by Pakistan’s government on those earning more than Rs 300 million. This was introduced via a bill that was passed on June 10.
The Finance Bill amended the tax system, revising it to 1% on the income between Rs 150 million to 199.99 million, 2% on Rs 200 million to 249.99 million, 3% on income between Rs 250 million to 299.99 million and 4% tax for those earning 300 million and above. A tax regime was introduced for the jewellery shops that was fixed at Rs 40,000.
According to Geo News, Pakistan’s government also hiked 10% tax on 13 major consumer industries such as the steel, oil and gas, cement, sugar, RLNG Terminal, auto industry, tobacco, textiles, banking, fertilizer, chemicals, aviation, and others. An amount of Rs 35 billion will be collected from the salaried population. Sharif’s finance ministry also slapped a 10% super tax on 13 high-earning sectors as it intends to collect Rs 80 billion for the financial year 2022-23 to save the economy.