Pakistan’s high taxation policies are increasingly seen as a barrier to investment and economic growth, prompting the government to propose a Rs975 billion tax-relief package under IMF oversight. Officials and business leaders hope that the Fund will allow fiscal flexibility to help the country unlock its productive capacity and stimulate job creation.
Read More: Pakistan Pushes for Tax Relief to Boost Growth
Under the current system, tax collection has risen sharply, with State Bank data showing a 12.5 percent year-on-year increase in Q1FY26. However, much of the relief is expected to benefit corporate taxpayers, while large segments of the economy, including agriculture, retail trade, real estate, and high-earning service providers, largely remain outside the tax net.
The corporate sector contributes around 65 percent of direct tax collections, while salaried individuals, less than 8 percent of the labor force, shoulder a disproportionately high burden. Former FBR chairman Shabbar Zaidi noted that the maximum salary tax rate is expected to be reduced by only five percentage points, offering Rs30–40 billion in relief, while the super tax could be cut from 10 percent to 5 percent.
PM Shehbaz Sharif has moved to secure IMF approval for a Rs975 billion tax relief package – including tax cuts and broad relief for the salaried class. 🇵🇰 pic.twitter.com/2gUNDXYQa6
— Mansoor Ahmed Qureshi (@MansurQr) December 3, 2025
Business leaders argue that Pakistan’s current high-tax regime undermines competitiveness, discourages investment, and accelerates skilled emigration. Proposed reforms include lowering corporate tax from 29 percent to 25 percent, rationalising individual and association-of-persons (AOP) rates to 25 percent, reducing sales tax to 15 percent, and removing the Capital Value Tax.
Officials say the success of the package depends on IMF approval and careful fiscal planning to bridge the resulting revenue gap. Experts stress that predictable, lower taxes stimulate investment, encourage formalization, and ultimately boost revenue, while immediate relief for salaried workers is critical to restore confidence and reduce the economic strain on households.
Read More: Salaried class likely to get tax relief in budget after IMF approval
The government is engaging closely with the IMF and hopes to phase in the measures over three years, balancing fiscal consolidation with growth-oriented reforms. The move is widely viewed as essential to create a more investment-friendly environment and support long-term economic stability.