Disagreement on four key areas has hampered the seventh review conference between Pakistan and the IMF (IMF).
PM Relief package on power and gasoline are the key causes delaying the 7th review, which commenced on March 4, 2022.
Sources said the Pakistani side, headed by Finance Minister Shaukat Tarin, failed to persuade IMF officials on two key issues: the PM Relief Package and tax amnesty. The PTI Government cannot revoke the PM Relief package owing to political ramifications.
This is an extremely tough judgment, and the government opposes it. The IMF also suggested a 5% tax on monthly incomes between Rs. 50,000 and Rs. 62,500, according to sources.
Currently, the government charges 5% on monthly income up to Rs. 100,000. The IMF proposes a 10% income tax rate for those earning up to Rs. 79,000 per month. Currently, only individuals earning up to Rs. 150,000 per month pay this amount.
According to reports, the IMF has recommended a 20% income tax on monthly incomes up to Rs. 104,000. Individuals earning almost Rs. 417,000 are presently taxed at 20%.
The IMF’s most harsh plan was to impose a 30% flat tax on those earning between Rs. 104,000 and Rs. 1 million per month.
Currently, persons earning up to Rs. 4.17 million per month pay 30% tax.
The IMF proposes a 35% income tax on anyone earning above Rs. 1 million per month, however this only affects 6,000 people. Currently, anyone earning above Rs. 7.25 million per month are taxed at 35%.
Affecting Pakistan politically, economically, and socially, the IMF plan has not been adopted. A 10% income tax will be levied on those earning up to Rs. 100,000 per month, according to sources. From Rs. 100,000 to Rs. 333,000 per month, the FBR proposes a 15% income tax
The FBR proposes a 20% tax rate for persons earning up to Rs. 666,000. The FBR recommends a 30% tax rate for those earning up to Rs. 1.25 million per month.
It recommends a 32.5 percent tax rate for people making Rs. 2.5 million or more per month, and a 35 percent tax rate for those earning more.
Currently, people earning above Rs. 6.25 million per month pay 35%. Besides the taxes of the salaried class, both parties could not agree on taxing retirees.
The IMF also wants to tax pensions, either when they are paid in or when they are withdrawn.
Disagreements over data sharing and virtual meetings have been resolved, according to the Ministry of Finance.
A vote of no confidence in parliament may further delay discussions since if the premier loses his majority, the Fund must wait for a new administration.