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IMF’s Proposal to Tax Salaried Class Unfair and Unwise

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The International Monetary Fund’s (IMF) new tax prescription for the salaried class has been met with widespread criticism. The proposal to tax both salaried and business individuals at a single income threshold is not just considered unfair, it’s a blatant injustice. It is disheartening that the lender, as well as successive governments, have only burdened an already obliterated section of society that contributes significantly to revenue generation. Meanwhile, big businesses, including real estate and agriculture, are widely off the tax hook and have benefited from subsidies and exemptions. 

The proposed 35% income tax rate at a monthly income of Rs333,000, and the withdrawal of all income tax credits and allowances from teachers, will not just add to economic woes, but will be a devastating blow to the struggling section of society. It appears that the coalition government, after signing on the dotted lines with the Fund, is risking its credibility and survival by attempting to generate Rs9.5 trillion taxes. The plan to raise an additional Rs650 billion from the lower strata of employees by undoing tax slabs to less than four is not seen as wise advice.

Extending the tax net and regulating the wider pie of the informal economy are both necessary, but penalizing the salaried class based on statistical assumptions is not a sound option. The government needs to come down hard on those who thrive on the premise of being well-connected. This ‘elite capture of the economy ‘, where a small group of influential individuals or entities control a disproportionate amount of resources, is untenable.

With only around 5.3 million active taxpayers as of December 2023 and the Fund asking to tax anyone with a salary of Rs51,000 per month rather than relaxing the ceiling owing to inflation and dipping purchasing power, the entire paradigm is up for a toss. The ‘degenerated growth forecast ‘, which refers to the projected decrease in economic growth, of less than 2%, inflation at 40%, and an unemployment rate of 7% mean that the budgetary figures cannot be fixed at the sole expense of salaried segments. 

Concludingly, the IMF’s proposal to tax the salaried class is not just irrational, it’s a call for immediate action. It will lead to revulsion and further exacerbate the already dire situation. The government needs to think genuinely and out of the box to find a better, fairer solution that doesn’t unfairly burden a section of society that is already struggling.

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