IMF deal: Pakistan agrees to raise taxes by Rs215bn

June 24, 2023 (MLN): To resume the International Monetary Fund (IMF) Program, the government of Pakistan has agreed to raise taxes by Rs215 billion in FY24, Finance Minister Muhammad Ishaq Dar said on Saturday.

Pakistan’s economic team held detailed discussions with the IMF team to complete the pending review over the last three days.

Amount in PKR Billion

With this increase in taxes, the Federal Board of Revenue (FBR) has successfully enhanced tax collection to Rs9,415bn from Rs9,200bn.

Additionally, an agreement has been reached to reduce expenses by Rs85bn, but Ishaq Dar assured that the reduction will not be from PSDP, salaries of government employees, and pensions.

“Will place the agreement with IMF once finalize on the website of the finance ministry,” he added.

As a result, the overall budget deficit will be reduced by Rs300bn.

The Federal Budget is expected to be passed within the next couple of days.

For the FY24 Federal Budget, a total of 59 suggestions were received for amendments. Among these amendments, taxes on bonus shares have been finalized at 10%, and dividends at 15%, which will be incorporated into the finance bill.

The tax on fans, initially imposed at Rs2,000, has been extended for an additional six months and will now be implemented starting from January 1, 2024.

A progressive super tax has been introduced based on income brackets as follows:

• Rs150-200m: 1%
• Rs200-250m: 2%
• Rs250-300m: 3%
• Rs300-350m: 4%
• Rs350-400m: 6%
• Rs400-500m: 8%
• Rs500m and above: 10%

In addition, all import restrictions previously imposed have been lifted.

In relation to pending litigation cases, there are approximately 62,000 instances where an amount of Rs3,200bn is stuck. To address this issue, a three-member committee, led by a retired individual, has been set up to resolve these cases efficiently. The business community is urged to collaborate in order to expedite the resolution process.

In terms of financial assistance and relief packages, the Ramzan package and the PM relief package will see an increase to Rs34bn from the previous allocation of Rs24bn for utility purposes.

To support the underprivileged, the Benazir Income Support Fund has been augmented by Rs66bn, raising the total allocation to Rs466bn for FY24. Additionally, the EOBI pension has been raised to Rs10,000 from Rs8,500.

Investment limits for behbood and shudda certificates have been raised to Rs7.5m from Rs5m to encourage greater investment participation.

The PDL limit on petrol and diesel has been increased to Rs60 per liter, which will affect pricing and consumption patterns.

Recognizing the need for pension reforms, it has been decided that all government officials will be entitled to receive pensions from a single authority. This measure aims to address instances where officials are receiving multiple pensions. Moreover, individuals who retire and subsequently join another job will have the choice to either receive a pension or a salary.

“From the last few months, the entire nation is asking whether the IMF 9th Review would be successfully completed or not, I want to assure that the government ensured compliance on all points of Prior Action by April 2023. However, due to an external financing gap, our case could not have been presented to the IMF board." Ishaq Dar said in his address to wind up the Federal Budget 2023-24 debate in the National Assembly.

Copyright Mettis Link News