ISLAMABAD – To pass on some relief on inflation-weary masses, Pakistani government is mulling options for easing income taxes.
The initiative comes as the coalition government, led by the Pakistan Muslim League-Nawaz (PML-N), faces pressure from the Jamaat-e-Islam (JI)’s ongoing sit-in in Rawalpindi, protesting high electricity bills and taxes.
In a recent federal cabinet meeting, Prime Minister Sharif reiterated the government’s commitment to reducing electricity bills to provide relief to the public, emphasizing that the issue should not be politicized.
Sources indicated that the government is considering various strategies to lower direct taxes for salaried individuals earning up to Rs100,000 per month. They also mentioned a proposed relief package worth Rs40 billion for low-income salaried individuals, which could involve reallocating funds from the development budget.
The International Monetary Fund (IMF) will also be consulted regarding the proposed tax relief.
The National Assembly passed the national budget on June 28, setting a challenging tax revenue target of 13 trillion rupees ($46.66 billion) for the fiscal year starting July 1, representing a 40% increase from the previous year. This target includes a 48% rise in direct taxes and a 35% increase in indirect taxes over the current year’s revised estimates. Non-tax revenue, such as petroleum levies, is expected to grow by 64%.
The budget also includes an 18% tax increase on textile and leather products and mobile phones, as well as higher taxes on capital gains from real estate. Workers will face increased direct taxes on their income.
Meanwhile, the Consumer Price Index (CPI)-based inflation rate was 11.1% year-on-year in July 2024, down from 12.6% in June 2024 and 28.3% in July 2023, according to data from the Pakistan Bureau of Statistics (PBS).
