In February, Pakistan’s government would most likely adopt new Personal Income Tax (PIT) legislation, which will tax the salaried class for about Rs. 160 billion.
The International Monetary Fund (IMF) stated in its Country Report that Pakistan will collect the proposed levy by raising tax rates and reducing the number of tax slabs. The new tax is expected to be proposed in the upcoming fiscal year budget and enacted on July 1st, according to the global lender.
According to the IMF, the PIT legislation will:
- reduce both the number of rates and income tax brackets;
- reduce tax credits and allowances (except those for disabled and senior citizens, and Zakat receipts);
- introduce special tax procedures for very small taxpayers;
- bring additional taxpayers into the tax net. Low-income households will remain protected as the reform preserves the current PIT threshold (almost three times income per capita).
On the other hand, until the end of March 2022, Pakistan has committed to issue regulations by the Public Procurement Regulatory Authority for the gathering and dissemination of beneficial ownership information from companies that are awarded procurement contracts worth Rs. 50 million or more.
The IMF has suggested from the start that additional tax policy reforms will help Pakistan address its perennial challenge of a low revenue base, which weighs on debt sustainability and severely restricts much-needed fiscal space for growth-enhancing spending on infrastructure, education, healthcare, and social assistance.
In light of this, the lender has urged Pakistan’s government to keep expanding the revenue base, eliminating informality, and modernizing the tax system.
To read our blog on “Fawad Chaudhry criticize FBR ‘Absurd’ Formula Regarding Tax,” click here.