Aurangzeb hints at tax reforms for Pakistan’s salaried group

Finance Minister Muhammad Aurangzeb acknowledged the “disproportionately high burden” on the country’s salaried group, hinting at a review of the current tax slabs.

“This is my personal view, that indeed, on the salaried class side, there is a disproportionately high burden.

“The reality is that we do need to think about the various tax slabs that we have. However, I cannot make any commitment around that,” he said.

Speaking at the event titled “Dialogue on the Economy”, organized by the Pakistan Business Council (PBC) on Tuesday, the finance minister said that the government intends to simplify the tax filing process for the salaried class.

“We want to make life simpler for the salaried class in Pakistan.”

He informed that the government has also kicked off its budget process in the first week of January.

“This will allow us the time to have a detailed discussion,” he said.

Aurangzeb said consultations with business chambers are planned to start in February, with detailed feedback expected by March-April.

“We are in the Fund (IMF) programme, we have made commitments, and therefore few things might have to be phased in or phased out,” he said.

As per a Finance Division circular, the budget for the next fiscal year 2025-26 will be presented in the first week of June 2025.

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

Referring to the Monetary Policy Committee’s (MPC) decision on Monday, where the central bank decided to cut the policy rate by 100 basis points (bps), the minister said that the KIBOR rate has come down to around 11%.

In line with expectations, the MPC of the State Bank of Pakistan (SBP) reduced the key policy rate by 100 basis points, taking it down to 12%.

This was the sixth successive cut in the key interest rate since June 2024 when it stood at 22%.

Aurangzeb expressed that the reduction in interest rates would improve business confidence.

Talking about SBP’s projection of reaching $13 billion foreign exchange reserves by the end of the current fiscal, Aurangzeb described it as “a very important milestone.”

“That will essentially take us to almost 3 months of import cover,” he said.

“If all goes well, this is a critical trigger for the economy and the sovereign being re-rated to a single B category.”

The finance minister noted that the country is moving in this direction on the back of “very strong remittance flows and IT services exports”.

Discussing the International Monetary Fund (IMF) programme, Aurangzeb reiterated that the government “is going to stay firm with those commitments”.

Aurangzeb further said that the government remains committed to reducing its expenditure and is pursuing the rightsizing policy.