IMF Program: Govt to introduce new taxes of Rs.700 billion

February 19, 2021

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As per the new agreement reached between IMF and Government of Pakistan for revival of IMF Financial assistance program, Government will take additional revenue measures of 1.4% of the size of its economy, or more than PKR 700 billion, to meet its tax collection target of about Rs 6 trillion in the next fiscal year.

As per the express tribune report, Government has been given a target by IMF to increase its Tax Revenue in next fiscal year of 2021-2022, where Income measures will include an increase in the tax burden on Salaries, Businesses and the corporate sector.

The government is also expected to withdraw about PKR 360 billion, or 0.7% of GDP, from sales tax exemptions from July this year.

For the upcoming fiscal year 2021-2021, the FBR Tax collection target will be over Rs 6 trillion, up 28% from the revised target for this fiscal year.

FBR will need to raise an additional Rs 1.3 trillion in the next fiscal year, including over PKR 700 billion in additional revenue measures. The remaining Rs 600 billion is expected to be raised from its current revenue base.

The International Monetary Fund has also asked Pakistan to review the current income tax exemption threshold of Rs 400,000 for legal entities and Rs 600,000 for salary class, describing the Tax slabs as higher than international standards.

As per the sources, IMF is not happy over high Debt-to-GDP ratio of 87% and low tax-to-GDP ratio of 10%. Hence, it is putting pressure on government to increase its Tax Revenue.

It is going to be a tough battle for the government to satisfy without burdening the public, specially the salaried class which is already under Inflationary stress.