Karachi, April 19, 2025 – The Institute of Cost and Management Accountants of Pakistan (ICMAP) has put forward a significant tax reform proposal, calling for the imposition of a 10% tax on high-income pensioners as part of its budget recommendations for the fiscal year 2025-26.
According to ICMAP, pensioners drawing monthly pensions exceeding Rs200,000 should be taxed at a flat rate of 10%, while those earning below this threshold should remain exempt. The institute emphasized that this measure would ensure equitable taxation and help increase government revenue without burdening low-income retirees. The ICMAP clarified that this proposal specifically targets affluent pensioners, particularly those from the public sector, who receive substantial retirement benefits.
“By taxing pension income above Rs200,000, the government can bring high-income pensioners into the tax net while safeguarding vulnerable retirees,” the ICMAP stated. This balanced approach, it added, promotes fairness in the tax system and addresses growing fiscal challenges, especially in light of rising pension expenditures.
The ICMAP further recommended leveraging the existing banking and pension disbursement systems to ensure smooth implementation and efficient compliance. Pension agencies and banks would play a crucial role in identifying taxable pensioners and deducting tax at the source. This collaboration will also improve transparency and minimize tax evasion among eligible pensioners.
The ICMAP estimates that this initiative could generate approximately Rs25–35 billion annually, depending on the number of pensioners falling into the taxable bracket. These funds could significantly reduce the fiscal burden of pension liabilities, freeing up resources for other development priorities such as healthcare, education, and infrastructure.
By proposing this reform, the ICMAP underlines the importance of shared fiscal responsibility and urges policymakers to adopt measures that reflect the principle of tax justice. As pensioners form a growing segment of the population, ensuring their contributions to national revenue—especially among high earners—has become a timely and necessary consideration in shaping a more sustainable fiscal framework.