Finance minister acknowledges high tax burden on salaries class, hints at tax slab review

ISLAMABAD: The disproportionately high tax burden on Pakistan’s salaried class has been acknowledged by Finance Minister Muhammad Aurangzeb, who hinted at a possible review of the current tax slabs.

The finance minister said this while addressing a “Dialogue on the Economy” event organised by the Pakistan Business Council (PBC).

Aurangzeb stressed the government’s intention to simplify the tax filing process for the salaried class. He said that we want to make life easier for the salaried class in Pakistan.

“The reality is that we need to think about the different tax slabs that we have. However, I cannot make any commitment about it,” he added.

According to a press release issued today, the finance minister revealed that the government had started its budget process in early January.

“This will give us time to have detailed discussions,” he said, adding that consultations with business chambers are scheduled to begin in February, with detailed feedback expected by March or April.

“We are in the Fund (IMF) programme, we have made commitments, and so some things will have to be done in phases or in stages,” he explained.

The budget for the financial year 2025-26 will be presented in the first week of June 2025, according to a circular from the Finance Division.

Aurangzeb reiterated that all economic indicators are moving in the right direction.

Referring to the Monetary Policy Committee (MPC) decision on Monday, where the central bank cut the policy rate by 100 basis points (bps), he noted that the KIBOR rate has fallen to around 11 percent.

The State Bank of Pakistan’s (SBP) MPC cut the key policy rate by 100 bps, bringing it to 12%.

This is the sixth consecutive rate cut since June 2024, when it was 22 percent. Aurangzeb hoped that the interest rate cut would boost business confidence.

He also highlighted the State Bank’s estimate of reaching $13 billion in foreign exchange reserves by the end of the current fiscal year, calling it “a very important milestone.”

“This will basically take us to about three months of import coverage,” he added.

“This is a major stimulus for the economy and if everything goes well, the sovereign will be re-rated to a B category,” Aurangzeb noted, attributing the development to “very strong remittance flows and IT services exports.”

Discussing the IMF program, he reiterated the government’s commitment to its responsibilities. Aurangzeb added that the government’s focus is on pursuing a policy of cost-cutting and entitlements.