Government Considers Limited Tax Relief

(Digital Itla) Instead of widespread tax relief, the federal government is considering a limited relief package in the upcoming budget to ensure continued compliance with the conditions of the International Monetary Fund (IMF) program. According to sources, the proposed relief may be largely restricted to the salaried class, industrialists, and exporters. Government sources state that various tax relief proposals have been presented to the Prime Minister, and a final decision will be made following his approval and consultations with the IMF.

The Ministry of Finance will seek the IMF's feedback on the proposed measures before June 10. Among the proposals under consideration for the salaried class is a reduction in income tax rates for individuals with a monthly income between PKR 200,000 and PKR 300,000. Under the proposed plan, approximately 550,000 taxpayers could receive relief; a 4% tax rate reduction has been proposed for monthly incomes up to PKR 267,000, and a 5% reduction for incomes up to PKR 341,000. Sources indicate that the government is also considering relief for high-income employees, with proposals under review to raise the threshold for the maximum tax rate and introduce a new tax slab so that the 35% income tax applies only to the highest earners.

On the other hand, the government is assessing the possibility of reducing heavy taxes on mobile phones, though sources note that prospects for significant relief here are limited. Currently, the total tax burden on imported mobile phones exceeds 55% when combining various duties and sales tax. A proposal to abolish the 15% dividend income tax for the corporate sector is also under consideration, which could provide major relief to companies; however, this measure is expected to have a financial impact of approximately PKR 90 to 100 billion on the national exchequer. Similarly, a proposal to eliminate the 1% advance income tax on exporters is being reviewed. According to sources, the government is not in the mood to grant any major relief to the real estate sector, while a proposal to increase sales tax on hybrid vehicles remains under discussion. Additionally, multiple tax proposals concerning paper, stationery, and cigarette products are under review, and the government will finalize these proposals in the coming days after concluding negotiations with the IMF.