In a notable tax reform recommendation ahead of the 2025–26 federal budget, the Institute of Cost and Management Accountants of Pakistan (ICMAP) has proposed a 10% flat tax on high-income pensioners. The suggestion targets individuals receiving monthly pensions above Pak Rs. 200,000, aiming to enhance revenue generation without impacting low-income retirees.
Under the proposal, only pensioners earning above the Rs200,000 threshold would be subject to taxation, while those below would remain exempt. ICMAP emphasized that the goal is to promote equitable taxation by targeting financially secure individuals, many of whom are former public sector employees with substantial retirement benefits.
Implementation Through Pension and Banking Systems
To ensure efficient collection and transparency, ICMAP recommends using existing pension disbursement and banking networks to deduct the tax at source. Banks and pension agencies would be responsible for identifying and managing deductions, minimizing evasion and administrative hurdles.
Potential Revenue Boost
According to ICMAP estimates, this tax could contribute between Pak Rs. 25–35 billion annually to the national treasury. These additional funds could ease the government’s rising pension liabilities and be redirected to critical sectors such as education, healthcare, and infrastructure development.
ICMAP framed the proposal as a matter of fiscal responsibility and fairness. With pension-related expenses increasing and high-income retirees forming a growing demographic, the institute argued that now is the time for a more inclusive and just approach to taxation. The recommendation encourages policymakers to consider reforms that align with broader goals of economic sustainability and equitable resource distribution.
