Asim Ahmad, chairman of the Federal Board of Revenue (FBR), stated on Tuesday that the International Monetary Fund (IMF) has rejected the Rs. 47 billion tax reduction offered to the salaried class by the Finance Bill 2022.
Ahmad told the journalists at Parliament House that the FBR would now propose modifications to the tax brackets since the government has no choice but to comply with the IMF’s demand. He claimed that the FBR is creating several models of tax slabs for salaried persons in order to lower the promised tax relief of Rs. 47 billion.
The FBR Chairman said that the IMF and the government do not agree on the personal income tax rates. The current idea is rejected by the IMF. He said that the government did not want to burden low-income individuals. However, if we do not raise taxes on low-income individuals, our revenue effect will remain negative, he said.
Due to the high cost of living caused by inflation, he said that the government must provide tax relief to the low-income class. He said that we must provide low-income workers with relief at whatever cost.
In the budget for the fiscal year 2022-23, the government had proposed exempting persons earning up to Rs. 100,000 per month from income tax, up from the previous ceiling of Rs. 50,000 per month. In addition, the twelve slabs were reduced to seven.
The majority of the population, according to the FBR chairman, earns up to Rs. 200,000 a month. The overall number of taxpayers in high tax brackets is so low that raising the tax rates would not have an appreciable effect on the income of the salaried class.
“We cannot impose excessively high tax rates on high-income earners, such as 75% instead of 35%, since the base of low-income earners is so broad, which has an effect on revenue collection,” he stated.