The IMF denies plans to ask Pakistan to raise payroll taxes

• The IMF has reportedly asked the government to reduce the number of tax slabs for salaried, business class.
• The IMF lent Pakistan $1.2 billion as a first tranche in July to stave off default.
• Pakistan faced an acute balance of payments crisis before the IMF bailout.

KARACHI: The International Monetary Fund (IMF) has denied media reports that the lender plans to ask Pakistan to raise taxes on wages and business income and raise the ceiling on oil levy.

Media reports have surfaced stating that the IMF has asked Pakistan to reduce the number of tax brackets for the salaried and business class from the existing seven to four, increasing the tax burden on the middle and upper middle income group. There were also reports of an increase in the oil development cap.

“There are no plans at this time,” said Esther Perez Ruiz, the IMF’s representative in Pakistan. Reuters in an email.

The nation is operating under an interim government after an IMF loan program, approved in July, helped avert a public debt default.

Under the $3 billion standby arrangement (SBA), Pakistan received $1.2 billion from the IMF as the first tranche in July.

Pakistan was facing an acute balance of payments crisis, with its foreign exchange reserves dwindling to just three weeks of controlled imports, along with historically high inflation and an unprecedented currency devaluation.

As part of the bailout deal, the IMF also asked the country to raise $1.34 billion in new taxation to meet fiscal adjustments. The measures fueled an all-time high inflation of 38 percent year-on-year in May, the highest in Asia, which is still hovering above 30 percent.