The proposed Rs. 47 billion tax cut in Personal Income Tax (PIT) is completely unacceptable to the IMF, leaving the government with little choice except to consider making revisions.
On Sunday night, top government sources confirmed to the News agency that the IMF had expressed strong misgivings about the proposed Personal Income Tax rates, under which the FBR has provided relief to persons earning up to 1.2 million rupees per annum.
To provide relief to the urban middle class, the IMF wants to provide relief to individuals earning up to Rs. 0.2 million per month, and subsequently raise tax rates in all other categories.
In contrast to the broader deal reached with the IMF during the PTI-led government’s 6th Review, which was used as a structural benchmark in the Fund accord.
Through the Finance Bill 2022 in parliament, the FBR recommended relief to those earning up to one million rupees per month wage in the budget for 2022-23.
If the planned PIT rates are not altered, they could become a major roadblock to reaching an agreement with the IMF at the staff level.
According to the Finance Bill 2022, anyone earning up to Rs. 1.2 million will pay only Rs. 100 in taxes.
Previously, a salaried employee earning up to Rs. 800,000 had to pay Rs. 10,000, up to Rs. 1.2 million Rs. 30,000, and up to Rs. 2 million Rs. 120,000 an annum.
A salaried employee earning Rs. 2 million per year will only have to pay Rs. 56,000 under the suggested rate.
The yearly tax duty for salary earners is up to Rs. 3 million used to be Rs. 282,000, but the recommended rate of tax liability has been decreased to Rs. 159,000.
Up to Rs. 4 million in salary, a salary earner had to pay Rs. 470,000 in income tax, but under the recommended rate, the tax liability is decreased to Rs. 304,000.
The tax due for a salary earner earning up to Rs. 5 million was Rs. 670,000, but it was cut to Rs. 479,000 under the proposed rate.
The proposed tax rates in the Finance Bill 2022 continued to provide relief to salaried individuals earning up to Rs. 1 million who had to pay a tax amount of Rs. 1.845 million.
The tax liability for salary income up to Rs. 1 million per month has been reduced to Rs. 1.554 million under the proposed Finance Bill 2022.
The planned tax rates were amended upward in the remaining slabs up to Rs. 20 million, Rs. 40 million, Rs. 60 million, and Rs. 80 million.
The FBR increased the taxable ceiling limit from Rs. 600,000 to Rs. 1,200,000 in the Finance Bill 2022 and the number of slabs was lowered from 12 to 7 under the Personal Income Tax system.
To read our blog on “Non income taxpayers will face major utility problems after budget 2022-23,” click here.
