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In an effort to provide relief to inflation-weary citizens, the Pakistani government is considering options to ease income taxes. This initiative comes as the coalition government, led by the Pakistan Muslim League-Nawaz (PML-N), faces pressure from Jamaat-e-Islam (JI), which is currently holding a sit-in in Rawalpindi to protest against high electricity bills and taxes.

During a recent federal cabinet meeting, Prime Minister Shehbaz Sharif reaffirmed the government’s commitment to reducing electricity bills to alleviate the public’s burden, stressing that the issue should not be politicized.

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Sources suggest that the government is exploring various strategies to lower direct taxes for salaried individuals earning up to Rs100,000 per month. Additionally, a proposed relief package worth Rs40 billion for low-income salaried individuals is under consideration, which may involve reallocating funds from the development budget.

The International Monetary Fund (IMF) will be consulted regarding the proposed tax relief measures.

On June 28, the National Assembly passed the national budget, setting an ambitious tax revenue target of 13 trillion rupees ($46.66 billion) for the fiscal year starting July 1. This target represents a 40% increase from the previous year and includes a 48% rise in direct taxes and a 35% increase in indirect taxes compared to the current year’s revised estimates. Non-tax revenue, such as petroleum levies, is expected to grow by 64%.

The budget also includes an 18% tax increase on textile and leather products and mobile phones, as well as higher taxes on capital gains from real estate. Workers will face increased direct taxes on their income.

Meanwhile, the Consumer Price Index (CPI)-based inflation rate was 11.1% year-on-year in July 2024, down from 12.6% in June 2024 and 28.3% in July 2023, according to data from the Pakistan Bureau of Statistics (PBS).