IMF taxes squeeze salaried class

They pay Rs144b in Jul-Sept; real estate gets 50% cut; retailers win fixed tax IMF taxes squeeze salaried class The salaried class has paid Rs144 billion in income tax in this fiscal year, which is Rs90 billion more than the taxes paid by retail and realty sectors, highlighting a widening disparity under the International Monetary Fund (IMF) programme that has endorsed a 50% cut for real estate and a fixed tax scheme for retailers. Official record of the past two fiscal years and provisional figures of the first quarter (July-September) of the current fiscal year suggested that at the completion of two years of the IMF programme, the tax contribution of the salaried class had multiplied. But the influential trading and real estate sectors remained largely outside of the net, with the IMF either endorsing tax concessions for them or keeping its eyes closed. The IMF executive board had approved the three-year $7 billion loan package in September 2024 and the Fund's staff has completed its ongoing visit to Pakistan for the fourth review of the programme. According to the FBR's provisional tax collection data, income tax collection from the real estate sector dived 38% to a mere Rs35.2 billion in the first three months of the current fiscal year. It was Rs22 billion less than the comparative period of the last fiscal year after the government cut income tax for the realty sector by 50%, which the IMF also endorsed. In fiscal year 2024, the realty sector had paid Rs200 billion in income tax, which hardly increased to Rs236 billion in the last fiscal year, but it has now been halved. In the budget, the government reduced the advance tax on sale and purchase of immovable property by 50%. On the sale of property, three slabs have been merged, and a single rate of 2.75% has been introduced against 5.5%. On the purchase of property, the tax rate has been reduced from 2.5% to 1.25%. Because of this steep reduction, the advance income tax collection on the sale of property decreased from Rs39.5 billion to Rs23 billion in three months, a reduction of Rs16.5 billion, or 42%. Likewise, on the purchase of properties, the income tax collection dipped from Rs17.7 billion to Rs12.2 billion, a reduction of Rs5.5 billion, or 31%, according to these statistics. Official data showed that withholding taxes paid by wholesalers and retailers almost remained stagnant during the first three months of the current fiscal year. The combined withholding taxes paid by wholesalers and retailers amounted to Rs18.4 billion during the first three months. These were Rs244 million, or 1.3%, more than the last fiscal year. Wholesalers paid Rs6.2 billion in three months, down by Rs701 million, or 10%. Instead of using the data of wholesalers to go after the retailers, the Federal Board of Revenue introduced a fixed tax scheme that has miserably failed. The traders, after making promises to become tax return filers, stayed outside of the net amid a lack of political will to go after them. Retailers paid Rs11.3 billion in income tax, higher by Rs945 million, or 8.3%, than the comparative period of the last fiscal year. The combined taxes paid by retailers and the real estate sector amounted to a mere Rs54 billion. It was Rs90 billion less than the taxes paid by the salaried class. According to tax officials, the income tax collection from the salaried class amounted to Rs144 billion during the July-September period of the current fiscal year. It was higher by Rs13.4 billion, or 10.2%, compared to the same period of last year. In the budget, the government claimed that it had given a Rs52 billion relief to the salaried class by up to 3% reduction in the tax rate and abolishing the 9% surcharge calculated on the basis of the highest tax rate of 35%. It also increased the applicability limit of the maximum tax rate of 35% from Rs4.1 million to Rs7 million annually. The massive reduction in collection from real estate has widened the gap between income tax payments made by the salaried class and the real estate sector. Before the start of the IMF programme, the annual contribution of the salaried class was Rs391 billion, which within two fiscal years of the IMF programme increased to Rs629 billion as of June 2026. The salaried class, like other middle- and lower-middle-income groups, is also adversely impacted by the government's decision to fully recover international oil prices, charge a petroleum levy of Rs80 per litre and climate support levy of Rs5 per litre. The daily price fluctuation is also causing a hike in fruit and vegetable prices. Prime Minister Shehbaz Sharif had promised to substantially reduce the tax burden of the salaried class once the tax base was broadened. However, instead of increasing tax collection from the highly undertaxed sectors, his government has further slashed their burden.