ISLAMABAD: The federal government is evaluating a range of tax relief measures for the upcoming budget, although broad-based concessions appear unlikely due to commitments under Pakistan’s ongoing programme with the International Monetary Fund (IMF).
According to government sources, tax authorities have submitted a list of proposed relief measures to Prime Minister Shehbaz Sharif for final consideration. The finance ministry is expected to discuss the proposals with the IMF before June 10, after which a final decision will be made.
Relief for Salaried Individuals Under Review
The government is considering tax relief primarily for salaried individuals, particularly those earning between Rs200,000 and Rs300,000 per month. Officials estimate that around 550,000 taxpayers fall within this income bracket.
One proposal suggests reducing the income tax rate by 4% for individuals earning up to Rs267,000 per month, while those with monthly incomes of up to Rs341,000 could receive a 5% reduction.
Additional proposals include revising income tax slabs to provide relief to higher-income earners. The government is examining options to raise the threshold at which the highest tax rates apply, easing the burden on middle- and upper-middle-income taxpayers.
Changes to Top Income Tax Brackets
Currently, individuals earning more than Rs342,000 per month are subject to a 35% income tax rate along with a 10% surcharge.
Sources said the IMF has shown willingness to increase the threshold to Rs467,000 per month. However, the government is seeking further flexibility and is considering introducing a new tax slab for monthly incomes of up to Rs583,000, taxed at a rate of 32%.
Under the proposal, the maximum 35% tax rate would only apply to incomes exceeding Rs583,000 per month. The government is also reviewing the possibility of abolishing the additional 10% surcharge imposed on taxpayers in the highest income bracket.
Corporate Sector Relief Being Considered
Among the major proposals is the abolition of the 15% dividend income tax paid by companies when distributing profits to parent firms. Officials estimate that removing the tax could have a revenue impact of between Rs90 billion and Rs100 billion.
The government is also assessing the possibility of reducing corporate income tax and super tax rates. However, fiscal limitations may require policymakers to choose between eliminating the dividend tax and reducing existing corporate tax rates.
Exporters Seek Tax Concessions
Another proposal under discussion is the withdrawal of the 1% advance income tax imposed on exporters. The measure is intended to support the export sector but could reduce government revenues by an estimated Rs80 billion to Rs85 billion annually.
The final decision will depend on available fiscal space and ongoing negotiations with the IMF.
Mobile Phone Taxes Remain a Key Issue
The government is also reviewing taxes imposed on imported mobile phones, which currently exceed 55% of a handset’s value in some cases.
For mobile phones valued above $700, consumers face multiple taxes and duties, including a mobile levy, regulatory duty, withholding tax, and sales tax. According to official figures, the Federal Board of Revenue (FBR) collected approximately Rs18 billion from mobile phone-related taxes during the previous fiscal year.
Despite calls for relief, officials indicated that significant reductions are unlikely due to revenue concerns and the high proportion of premium devices among imported handsets.
Limited Relief Expected for Real Estate
Sources suggested that tax relief for the real estate sector is unlikely, particularly following recent adjustments to property valuation rates and measures introduced for overseas Pakistanis.
The government believes that recent reforms have already addressed several concerns raised by property investors and non-resident Pakistanis.
Additional Tax Measures Under Consideration
Authorities are also evaluating proposals to increase sales tax on imported paper products, excluding newspapers, and stationery items.
A separate proposal seeks to introduce a third tier of federal excise duty on cigarettes. However, policymakers remain divided on the measure and are consulting with compliant tobacco manufacturers before making a final decision.
Meanwhile, the government is not expected to reduce the existing 20% federal excise duty on juices and carbonated beverages. Officials are also considering increasing sales tax rates on hybrid vehicles, while taxation policies for electric vehicles remain under review.
Final Decisions Await IMF Consultations
Government officials said all proposed relief measures and tax adjustments remain subject to discussions with the IMF and the availability of fiscal resources.
As preparations for the federal budget enter their final phase, the government faces the challenge of providing targeted relief to taxpayers and businesses while maintaining fiscal discipline under its international commitments.
