The Pakistani government has briefed the International Monetary Fund (IMF) about proposed tax changes for the upcoming 2025-26 budget. Among these changes is a possible reduction in the income tax burden for the salaried class by up to 10% across various income brackets.
If the IMF agrees, this cut could bring a major relief. The government estimates the benefit could reach up to Rs50 billion for middle- and high-income earners. The ongoing discussion between Pakistan and the IMF is scheduled from May 14 to 22. However, the exact venue for the meetings remains undecided.
Sources within the government confirmed on Sunday that authorities are willing to introduce fresh revenue measures. These will help balance out the loss caused by providing relief to the salaried class. The talks with the IMF will explore these ideas further.
Officials emphasized that negotiations would focus only on closing the revenue gap created by these proposed relief measures. For example, if the government cuts Rs50 billion in income tax for the salaried class, the same amount must be recovered elsewhere.
According to official data, salaried individuals paid over Rs450 billion in taxes between July and April alone. That figure already exceeds the total Rs368 billion collected from the salaried class in the entire last fiscal year.
Last year’s budget had projected an additional Rs100 billion in income tax from employees. But reality painted a different picture. The Federal Board of Revenue (FBR) actually expects to collect between Rs225 to Rs250 billion more from the salaried class during the current fiscal period. By June 2025, this group may contribute as much as Rs550 billion in total taxes.
The tax burden has grown sharply, especially for those earning between Rs200,000 to Rs300,000 per month. For many in this range, income tax rates rose to 40% and even 45%. For individuals earning more than Rs1 million per month, the situation is worse. They face an additional 10% surcharge over and above the already steep 40% tax rate.
One high-income employee expressed frustration, saying it felt like their salary only existed to feed the tax system. “In this country, earning more feels like a crime,” he said. He warned that if rates aren’t brought down, professionals may ask their employers to pay part of their wages in cash.
When approached on Sunday, the FBR’s spokesperson confirmed that several proposals for the salaried class are still under internal review.
