Pakistan plans salaried class tax relief in FY27 budget but IMF constraints limit scope

Pakistan plans to reduce the income tax burden on salaried individuals in the federal budget for fiscal year 2026-27, Minister of State for Finance and Revenue Bilal Azhar Kayani said on Friday.

Speaking at a pre-budget seminar in Rawalpindi, Kayani acknowledged that limited fiscal space under the IMF program could constrain how much relief the government can deliver. The FY27 budget is expected to be presented in the first week of June.

What tax relief is the government considering for salaried workers?

The government intends to reduce the tax burden on the salaried class, but the extent of relief will depend on commitments made under Pakistan's IMF stabilisation program.

Options under consideration include adjusting income tax slabs or revising rates downward. Kayani said authorities are working to provide the maximum possible relief despite tight fiscal space.

How is the IMF program limiting budget decisions?

Pakistan's commitments under the IMF program, including maintaining a primary surplus and broadening the tax base, significantly restrict how much revenue can be foregone.

Kayani said budget decisions are being made in line with IMF primary targets. He acknowledged room for improvement in several sectors but framed relief measures as conditional on meeting those targets.

What other budget and reform measures did Kayani outline?

Kayani said the government collected PKR 803 billion through tax enforcement in the previous fiscal year and is reviewing manufacturing capacity on a sector-by-sector basis.

He highlighted the introduction of a faceless customs system to improve transparency and said Prime Minister Shehbaz Sharif holds weekly meetings on FBR reforms. The minister also pledged zero tolerance for harassment by tax authorities.

On macroeconomic conditions, Kayani said Pakistan had achieved stability over the past two years through fiscal discipline, citing improved foreign exchange reserves and renewed confidence from international financial institutions.

He added that the Pakistani rupee remained stable despite regional geopolitical tensions. Boosting exports and reducing reliance on IMF assistance remain key government priorities.

What did the business community demand at the seminar?

Business leaders attending the Rawalpindi seminar urged the government to abolish the super tax, reduce corporate and sales tax rates, and raise the income tax exemption threshold for salaried individuals.

They also called for measures to lower the cost of doing business and a long-term industrial policy to support sustainable economic growth.

What did traders ask for in separate budget proposals?

A delegation from the Central Organization of Traders Pakistan met Kayani in Islamabad to present proposals for the retail and wholesale sectors.

The delegation called for regulatory reforms, simplified administrative procedures and the introduction of an "easy tax scheme" to encourage voluntary tax compliance.

Kayani said Prime Minister Sharif would consider the simplified tax scheme proposal and reiterated the government's commitment to a business-friendly environment.