The International Monetary Fund (IMF) has proposed a series of tax hikes to the newly elected government of Prime Minister Shehbaz Sharif, aiming to raise 1.3 trillion rupees (approximately $7.4 billion). These recommendations come amidst ongoing talks between the IMF and Pakistan for a potential bailout program. These suggestions come in the midst of ongoing discussions between Pakistan and the IMF regarding a potential bailout program. The IMF's recommendations encompass various tax adjustments, including the removal of exemptions and an elevation of the sales tax to 18% on several commodities. These items include essential food products, with the suggestion to abolish concessional taxes on sugar and other essentials. Additionally, medicines, presently exempt from sales tax, would face an 18% levy, while the IMF proposes an increase in the sales tax on petroleum products from 0% to 18%.

Further recommendations extend to the restructuring of wage taxes, with potential revisions to the tax structure for both salaried and non-salaried individuals. This restructuring could involve simplifying the tax system by reducing the number of tax brackets from 7 to 4 and raising tax rates accordingly. The IMF anticipates that these proposals could generate an additional 1.8 trillion rupees (approximately $10.3 billion) in government revenue, with 480 billion rupees specifically attributed to changes in wage taxes. However, the implementation of these recommendations could lead to higher consumer prices, particularly for essential goods like food and medicine, as well as potentially increased tax deductions for certain individuals. Currently, the Pakistani government is deliberating on the IMF's suggestions. While these proposals may aid in securing a bailout program, they are likely to face resistance from the public due to concerns about heightened living costs and an increased tax burden.

Credit: Independent News Pakistan (INP)