As the National Assembly’s final approval draws near next week, the federal government is thinking of either enacting an additional Rs. 30 billion in taxes or reducing spending in proportion to fulfill the International Monetary Fund’s (IMF) requirements for the FY2025–2026 budget.
The Federal Board of Revenue (FBR) has been instructed by Prime Minister Shehbaz Sharif to reduce the income tax rate for the first salaried bracket (Rs. 600,000 to Rs. 1.2 million yearly) from 5% to 1%.
In order to partially offset the fiscal impact of a 10 percent pay raise for public sector personnel, the rate was previously changed to 2.5 percent during the June 10 federal cabinet meeting. The expenditure increased by Rs. 29–30 billion as a result of this rise.
It was estimated that the interim 2.5 percent rate will increase income tax collections by Rs. 9.5 billion.
The IMF has been adamant on maintaining budgetary figures, though.
The PM has mandated the greatest amount of relief for low-income taxpayers, even though the FBR delivered the 2.5 percent slab to the Senate Finance Committee earlier this week.
The administration must now decide whether to reduce spending on other expenses or implement other income initiatives. Prior to the budget being approved, ongoing talks with the IMF are aimed at resolving these outstanding concerns.
