FinMin signals tax reforms for Pakistan's salaried class

January 28, 2025 (MLN): The disproportionately high tax burden on Pakistan’s salaried class has been acknowledged by Finance Minister Muhammad Aurangzeb, who hinted at a potential review of the current tax slabs.

This was said by the finance minister while addressing the “Dialogue on the Economy” event organized by the Pakistan Business Council (PBC).

Aurangzeb emphasized the government’s intention to simplify the tax filing process for the salaried class. “We want to make life simpler for the salaried class in Pakistan,” he said.

"The reality is that we do need to think about the various tax slabs that we have. However, I cannot make any commitment around that,” he further stated.

The finance minister revealed that the government initiated its budget process in early January, according to the press release issued today.

“This will allow us the time to have a detailed discussion,” he said, adding that consultations with business chambers are scheduled to begin in February, with detailed feedback expected by March or April.

“We are in the Fund (IMF) program, we have made commitments, and therefore few things might have to be phased in or phased out,” he explained.

According to a Finance Division circular, the budget for the fiscal year 2025-26 will be presented in the first week of June 2025.

Aurangzeb reiterated that all economic indicators are moving in the right direction.

Referring to the Monetary Policy Committee (MPC) decision on Monday, where the central bank cut the policy rate by 100 basis points (bps), he noted that the KIBOR rate had dropped to around 11%.

The MPC of the State Bank of Pakistan (SBP) reduced the key policy rate by 100 bps, bringing it down to 12%.

This marks the sixth consecutive cut in the rate since June 2024, when it stood at 22%. Aurangzeb expressed optimism that the reduction in interest rates would boost business confidence.

He also highlighted the SBP’s projection of reaching $13 billion in foreign exchange reserves by the end of the current fiscal year, describing it as “a very important milestone.”

“That will essentially take us to almost three months of import cover,” he added.

“This is a critical trigger for the economy and the sovereign being re-rated to a single B category if all goes well,” Aurangzeb noted, attributing this progress to “very strong remittance flows and IT services exports.”

Discussing the IMF program, he reaffirmed the government’s commitment to its obligations. Aurangzeb further mentioned the government’s focus on reducing expenditures and pursuing a rightsizing policy.

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