Before the budget by three days, the government has suggested tax slabs benefitting salaried individuals, super tax reduction, scrapping advance income tax on exporters, and concessions to the real estate sector. None of these measures have been sanctioned by the IMF yet. At the same time, raising GST on solar and hybrid cars is also being considered.
ISLAMABAD: As the budget will be presented on June 10, the government of Pakistan has prepared an agenda of tax reforms from providing tax relief to salaried class to reducing super tax for corporates, tax concessions for exporters and real estate, to an increase in GST rate for solar panels, hybrid cars, and more than twenty other categories. The package of Pakistan budget 2026-27 IMF tax proposals seems comprehensive. The issue is that all this hasn’t been approved by the IMF yet, and how the Fund will react to each proposal will decide which one makes it into the budget being presented by Finance Minister Aurangzeb.
The Relief Package The Wish List of Salaried Individuals & Exporters
As part of the IMF recommendations for the Pakistan budget 2026-27, it is recommended that there be a reduction in tax slabs for salaried individuals, which will be one measure that could directly benefit the majority of middle-class families in the country. The salaried class is one such class that is heavily taxed, as compared to the trading community, real estate developers, and agriculture income earners. This will provide disposable income relief to the salaried individuals in the formal economy, especially when their incomes have declined due to the high level of inflation for the last two years. It will depend on how the government convinces the IMF that it won’t affect the revenue collection target of Rs15,264bn for FY2027.
Cutting super tax by 2 percentage points will be beneficial for Pakistan’s biggest companies since super tax is an additional charge that has been imposed due to fiscal problems in the past. Elimination of the 1 percent advance income tax on exporters will solve a problem that has arisen due to the advance income tax. The problem is that the advance income tax has to be paid in advance by the exporter without calculating the actual tax obligation, thus creating a cash flow problem for the exporter.
ALSO READ: Gilgit-Baltistan Development Budget Rises 27% to Rs39 Billion
GST Increase Side Solar, Hybrids, Plus Twenty More Items
Negotiations have started to raise the General Sales Tax on items such as solar panels, hybrids, and around twenty more types of goods from their current rates to the standard 18 percent level. This constitutes the revenues side of the 2026-27 IMF Pakistan budget tax reform equation. In order to meet the budget deficit reduction objectives of the International Monetary Fund, the government can only give tax breaks on one side of the equation if it raises similar or higher revenues on the other. Solar panels and hybrids are two of the most rapidly growing sectors in Pakistan right now; but they have been growing because of people making rational decisions in response to rising electricity bills and fuel prices.
According to senior sources within the government, while it has been decided that the revised target for the year will be Rs13,428 billion, it would take an additional Rs1,836 billion for the FBR to earn Rs15,264 billion by FY2027, which implies a year-on-year increase of about 13.7 percent in FBR collection. This is because achieving the target has become increasingly difficult without some new tax initiatives. The mathematical fact mentioned above is the actual logic behind including both tax cuts and tax hikes in the IMF tax proposals for the Pakistan budget 2026-27.
Depends on One Meeting What Will Be In the Budget
The Pakistan budget 2026-27 IMF tax proposals plan as of now on June 7 is just a discussion, rather than being an accepted budget plan. Whether IMF’s stance on the relief in taxation slab for salaried class, super tax cutback, elimination of advance tax for exporters, concessions on properties, solar GST, or EVs remains a factor in determining the outcome of the budget for Pakistanis on June 10. It is going to be seen how this government is able to fulfill its commitment towards providing relief amid opposition by IMF on tax revenues.
