IMF Rejects Claims of Considering Salary Tax Hike in Pakistan

KARACHI: Tax The International Monetary Fund (IMF) resident representative in Pakistan on Friday denied media reports that the lending body is planning to ask Pakistan to increase taxes on salaries and business income, and increase the maximum threshold for petroleum levy.

Contrary to circulating media reports, the International Monetary Fund (IMF) has firmly denied the alleged request for Pakistan to reduce the number of tax slabs for both salaried and business classes, purportedly diminishing them from seven to four.

Such a move, as speculated, would have potentially heightened the tax burden on the middle and upper-middle income segments, drawing concerns from various quarters.

In addition to the tax-related rumors, there were also swirling speculations regarding a potential increase in the maximum petroleum development levy. These claims, however, have been unequivocally dismissed by Esther Perez Ruiz, the IMF’s resident representative in Pakistan. In an email response to Reuters, Ruiz asserted that there are currently no plans for such adjustments.

It’s noteworthy that Pakistan finds itself under a caretaker government subsequent to the approval of an IMF loan program in July, which effectively averted a looming sovereign debt default. The $3 billion standby arrangement (SBA) included an initial tranche of $1.2 billion disbursed in July.

The nation had been grappling with a severe balance of payment crisis, with foreign exchange reserves dwindling to a mere three weeks of controlled imports. This economic turmoil, compounded by historically high inflation rates and an unprecedented currency devaluation, underscored the urgency of the IMF bailout.

As part of the $3 billion SBA agreement, Pakistan was mandated to implement fiscal adjustments, including raising $1.34 billion through new taxation.

While these measures succeeded in stabilizing the economic landscape, they also triggered a record-high inflation rate of 38% year-on-year in May, standing as the highest in Asia.

Despite subsequent efforts, inflation levels persist, maintaining an elevated position above 30%, prompting ongoing scrutiny and discussion within economic circles.

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