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As the clock ticks toward the June 2, 2025, budget announcement, Pakistan’s federal government appears poised to introduce a series of sweeping tax reforms in its fiscal year 2025-26 (FY26) plan.
The goal: generate an estimated Rs500–600 billion in additional revenue.
In a notable shift, the government is likely to broaden its tax net to include digital income streams. Freelancers, vloggers, and YouTubers are expected to come under the taxation umbrella for the first time.
As per Topline Research’s “Pakistan Federal Budget FY26 Preview,” this inclusion follows recommendations from various bodies, including the Institute of Cost and Management Accountants of Pakistan (ICMAP), which proposed a 3.5% tax on income from social media platforms.
This measure alone is projected to yield Rs52.5 billion, targeting platforms like YouTube and TikTok.
FBR’s New Revenue Target
The Federal Board of Revenue (FBR) is anticipated to receive a revenue target of Rs14.1–14.3 trillion, representing a 16–18% year-on-year increase from FY25. Of this, 12% growth is expected through autonomous factors, namely, a real GDP growth of 3.6% and inflation at 7.7%. The remaining 4–5% will depend on new taxation policies.
High-earning pensioners may no longer remain untaxed. The government is exploring a 2.5–5% tax rate on pensions exceeding Rs400,000 per month. This could generate Rs20–40 billion, a revival of a previously debated initiative from FY25.
With pension expenditures already hitting Rs673 billion in the first nine months of FY25po, potentially crossing Rs1 trillion annually, this move is seen as part of broader fiscal discipline.
GST Calculations to Align with PBS Prices
Another significant update includes adjusting GST on essential goods based on the prices published by the Pakistan Bureau of Statistics (PBS). For instance, GST on sugar is currently calculated at Rs72.22/kg despite the market price being around Rs150/kg. Aligning the base price is expected to bring in an extra Rs70–80 billion annually.
Health-Focused Taxes on the Rise
To address public health concerns, a 20% increase in Federal Excise Duty (FED) on ultra-processed food items like snacks and biscuits is on the table. This marks the first step toward a long-term goal of raising FED to 50% by FY29.
The move is aimed at combating rising cases of obesity, type 2 diabetes, and cardiovascular diseases. An increase in the FED on cigarettes is also likely to accompany this step.
In a major compliance push, the government is preparing to eliminate the non-filer category. A proposed law submitted to Parliament aims to bar non-filers from major transactions, such as purchasing vehicles or property. The change will be introduced under Section 114C, though technical system upgrades and possible initial relaxations are under discussion.
Carbon Tax and Fuel Adjustments
The Petroleum Development Levy (PDL) might see an expansion to include furnace oil (FO), in addition to the existing levies on petrol and diesel. A gradual Rs5/litre increase in PDL, labelled a carbon tax, is also in the pipeline. This could generate Rs35–80 billion if implemented, depending on final rates and fuel volumes.
The International Monetary Fund (IMF) has set a minimum target of Rs295 billion from retailers for the first half of FY26. In response, the government is expected to increase advance taxes on distributors and similar channels to meet this target.
Additionally, the IMF has proposed a 5% rise in FED on fertilisers and pesticides, which could add over Rs30 billion in revenue — a measure the government is likely to adopt.
Likely and Proposed Measures
Other anticipated fiscal adjustments include:
- Ending reduced GST rates and removing exemptions, especially for FATA/PATA regions.
- Introducing an agricultural income tax through provincial authorities.
- Raising GST on luxury goods such as high-end electronics, cosmetics, jewellery, aircraft, ships, and premium mobile phones.
Salaried Class and Real Estate May Benefit
Despite the flurry of new taxes, some relief measures may be introduced:
- Tax concessions for salaried individuals.
- Real estate sector incentives.
- Import duty reductions on vehicles and relaxation of age limits from 3 to 5 years.
- Housing finance subsidies to support home ownership.
As Pakistan navigates economic recovery under IMF oversight, the FY26 budget signals a balancing act, expanding the tax base, meeting fiscal goals, and selectively providing relief to ease public burden.
