IMF demands pension tax on retired govt employees
FUND'S SUPPORT TEAM REACHES PAKISTAN TO DISCUSS NEW LARGER PROGRAMME
The International Monetary Fund (IMF) has reportedly presented new demands to Pakistan ahead of crucial negotiations set to begin today. Among these demands is the taxation of pensions for retired government employees.
According to media reports, an IMF team on Friday reached Pakistan to hold talks regarding the South Asian nation’s request for a longer and larger size of bailout package under the Extended Fund
Facility (EFF). The team of the global lender will discuss the first phase of the next long-term loan programme with the country’s financial team.
The advance party has reached Pakistan for talks while the IMF mission will arrive on the night of May 16. They will stay in Pakistan for more than 10 days.
The IMF seeks additional revenue generation of 0.5% of Pakistan’s Gross National Product (GDP), translating to approximately Rs600 billion. This revenue is expected to come primarily from taxes levied on salaried individuals and businesses.
The IMF is emphasizing the need for Pakistan’s Federal Board of Revenue (FBR) to focus on increasing tax collection. Furthermore, the IMF reportedly advocates for the elimination of tax exemptions currently enjoyed by several pension schemes.
The upcoming negotiations mark the 24th IMF program for Pakistan and are touted as the most challenging to date. Pakistan seeks a two-pronged loan approach: one to support infrastructure reforms and another to address climate change challenges.
A key point of contention is the IMF’S proposal to tax retiree pensions. Finance Minister Muhammad Aurangzeb has acknowledged that the final size and duration of the loan program remain undecided, but details are expected to be finalized soon. He also indicated that imposing a tax on pensions and eliminating other benefits could generate an additional Rs22-25 billion annually for the government.
Moreover, the team will receive data from different departments and will also discuss the upcoming budget 2025 with the Ministry of Finance officials, as per local media reports.