As the International Monetary Fund (IMF) completely rejected the proposed tax relief in the Personal Income Tax (PIT) to the tune of Rs47 billion, the government is left with no option but to consider making changes to the proposal.
While the Federal Board of Revenue (FBR) has given the relief to the salaried class earning up to 1.2 million rupees per annum, top official sources said that the IMF conveyed its clear reservations regarding the proposed rate for the PIT.
To provide relief to the urban middle class, the Fund wants that the relief be restricted only to people with up to Rs0.2 million earning per month and that tax rates should be jacked up later in other slabs.
Contrary to this broader agreement with the IMF during the sixth review under the PTI-led government which was placed as a structural benchmark under the Fund agreement, the FBR proposed relief to those who are earning up to one million rupees per month in salary in the budget for 2022-23 through Finance Bill 2022 in Parliament.
These proposed PIT rates, if not changed, could turn into a major blockade to strike a staff-level agreement with the IMF.
The IMF wanted increased revenue collection up to Rs125 billion by placing PIT in a progressive format but the government took steps another way round and made it impossible for both sides to strike a staff-level agreement under the $6 billion Extended Fund Facility with the existing proposal of PIT.