What the Government Is Proposing
The federal government is preparing a tax-relief package that focuses on two headline moves: ending the super tax and reducing income tax rates for salaried individuals. According to available details, Prime Minister Shehbaz Sharif has approved a proposal to seek the International Monetary Fund’s (IMF) consent to abolish the super tax and cut the income tax rate for salaried people by five percent.
In practice, this means the government wants to roll back a surcharge that has been applied to higher-income individuals and parts of the corporate sector, while also easing the burden on the salaried segment, which often has taxes deducted at source and limited room to “adjust” taxable income. The proposals are expected to be taken to the IMF for review and approval next week.
Super Tax: Who It Targets and Why IMF Approval Matters
The super tax has been imposed on wealthy individuals and the corporate sector as a way to raise additional revenue during periods of fiscal stress. Removing it would be a meaningful policy shift because it reduces the government’s revenue options at a time when Pakistan is still operating under an IMF-supported program.
That is why the step is tied to IMF consent. Under the Extended Fund Facility framework, major revenue measures and tax policy changes are typically discussed with the IMF to ensure fiscal targets remain achievable. If the IMF believes abolishing the super tax creates a gap in revenue, it may ask Pakistan to offset that gap through other measures, such as widening the tax net, improving compliance, adjusting indirect taxes, or reducing expenditure.
Salaried Tax Cut: 5% Reduction and a 30% Top Rate Idea
Along with ending the super tax, the government is considering reducing the maximum income tax rate for the highest salaried income group by five percentage points. As reported, the aim would be to bring the top rate down to 30%. There is also discussion of increasing the income slab at which the new rate would apply, meaning fewer people would hit the top bracket, and those who do would face a lower marginal rate.
For salaried individuals, the impact depends on two things: the final slab thresholds and whether the rate cut applies only to the highest bracket or cascades into adjacent brackets. Even if the cut is focused at the top, it can reduce the tax burden for professionals and senior executives who currently pay the highest marginal rates. From the government’s perspective, it may also be an attempt to address long-standing concerns that the salaried class bears a disproportionate share of direct taxation compared to undertaxed sectors.
What Happens Next: Refinement, Fiscal Space, and Budget Trade-Offs
The prime minister has reportedly directed tax authorities to further refine the proposals with the help of private sector consultants before taking them to the IMF. This suggests the government wants a stronger technical case on revenue impact, distribution effects, and how any shortfall would be covered.
Officials have indicated the government had aimed to reduce taxes in the range of Rs1.5 trillion to Rs1.8 trillion. That is a large number for a budget already constrained by debt servicing, subsidies, and development needs. Because of that, sources also acknowledge it is unlikely the IMF would allow that level of fiscal space without clear compensating measures.
For ordinary taxpayers, the biggest takeaway is that relief is being explored, but it is not final. The IMF review will be central to what is approved, what is delayed, and what trade-offs are required. If the government succeeds in securing agreement, the final package will likely appear as part of the upcoming budget decisions, along with new compliance and enforcement steps meant to keep revenue on track.
