The International Monetary Fund (IMF) has raised concerns over the Federal Board of Revenue’s (FBR) proposal to grant significant tax relief to the salaried class in Pakistan’s upcoming budget.

The IMF has rejected Pakistan’s argument that high tax rates result in lower revenues, urging authorities to adhere to its expert recommendations rather than citing local ground realities. The global lender specifically questioned the Revenue Division’s plan to ease the tax burden on salaried individuals.

Pakistan had suggested increasing the annual tax exemption threshold from Rs. 600,000 to Rs. 1.2 million and introducing new tax slabs at 10 percent, 25 percent, 33 percent, and 35 percent, while raising income brackets. The IMF, however, has opposed these changes.

IMF mission chief Nathan Porter has outlined four priority areas for Pakistan: achieving the Rs. 14.3 trillion tax target, recalibrating National Finance Commission (NFC) transfers without constitutional amendments, reducing the size of government, and advancing privatization efforts.

Following discussions with the IMF, there is limited room to support the real estate sector. A proposal to reduce withholding tax on property transactions by 0.5 percent each is under consideration, with the FBR seeking to make this a final tax, while the finance minister prefers keeping it adjustable.

The government also discussed lowering the 18 percent sales tax on packaged milk to between 15 and 17 percent, though no decision has been reached. Similarly, a proposed federal excise duty on biscuits remains unresolved, and talks continue on withdrawing the tax-free status of ex-FATA.

The IMF team, currently holding virtual talks from Turkey, is expected to arrive in Islamabad next week. Final budget discussions are scheduled to conclude on May 23.