As the current fiscal year draws to a close, the Federal Board of Revenue (FBR) faces a staggering deficit of Rs864 billion, highlighting the persistent inefficiency of the tax machinery and the flawed system under which it operates. The upcoming budget is expected to introduce massive tax hikes, particularly targeting segments of the economy already burdened by high taxes.
Salaried Class Under Pressure
The salaried class, which contributes approximately Rs500 billion to overall tax revenues, is likely to face additional taxes. Meanwhile, other promising revenue streams continue to evade taxation under elite patronage. The government is reportedly considering several measures, including increasing withholding taxes on imports, adjusting income tax rates on wholesalers, imposing new sales taxes on fast-moving consumer goods at market prices, and raising the sales tax on hybrid vehicles from the current 8.5-12.75% to 18%.
IMF-Driven Targets
To meet the International Monetary Fund's (IMF) tax target of Rs15.264 trillion for the next fiscal year, the government plans to raise Rs400 billion through taxes imposed by provinces. Additionally, the petroleum levy target for the next fiscal year has been set at Rs1.73 trillion. These measures are seen as burdening the common citizen and pushing the economy further into stagnation.
Exceptions for Small Traders
The only sector expected to receive relief is small traders, who will face a 1% tax on annual turnover up to Rs200 million. This exception, however, does little to offset the overall impact of the tax increases.
Economic Performance
The economy has underperformed across almost all sectors, growing at just 3.2% against the target of 4.2%. Agriculture, industrial production, and exports have also declined, while remittances face uncertainty due to potential job losses for expatriates amid the Middle East conflict. The government now faces the challenge of balancing the IMF's rigid demands with the need to protect the economy from further decline.
