IMF-Pakistan Tax Talks Stumble Over Income Tax and Sales Tax Disputes

Discussions between Pakistan and the IMF ended without resolution due to disagreements over new income tax rates for salaried and non-salaried individuals, along with a proposed 18% sales tax on agriculture and health goods. Prime Minister Shehbaz Sharif is resistant to increasing tax rates for salaried persons despite IMF pressures.

IMF and Pakistan's negotiations over tax reforms ended inconclusively, primarily due to disagreements over new income tax rates and a proposed 18% sales tax on agriculture and health sector goods, reports the Express Tribune. Key sticking points included adjustments to tax rates for salaried and non-salaried individuals and taxing exporters at higher rates.

On Friday, officials discussed unresolved issues, including merging tax slabs and adjusting tax thresholds. Sources revealed that IMF is pushing for a higher 45% income tax rate for individuals earning over Pakistani Rs 4,67,000 monthly, whereas the current maximum is 35% on incomes over Rs 5,00,000 monthly.

Prime Minister Shehbaz Sharif remains opposed to increasing the tax burden on salaried individuals, contrasting the IMF’s insistence on higher rates. Another discussion round is anticipated as Pakistan seeks an agreement before the end of the fiscal year to secure a crucial IMF loan and avoid economic instability.