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With a record tax revenue target for FY26, the federal government is proposing tax hikes on essential items like food, books, and stationery in the Budget 2025-26 — a move that could intensify the inflation burden on ordinary citizens.
As the government shifts from its earlier “tax broadening” narrative to a new approach focused on “equity,” the Federal Board of Revenue (FBR) is planning to increase existing lower tax rates across a wide range of sectors, including essential goods. This marks a second phase of the strategy, following the withdrawal of exemptions on food and educational items in previous years.
The proposed tax hikes on food, books, and other everyday essentials in Budget 2025-26 are expected to hit lower- and middle-income households the hardest. These segments are already struggling with high utility bills, shrinking purchasing power, and stagnant wages.
The rationale, officials argue, is to ensure “equitable” revenue collection, as Pakistan targets nearly Rs14 trillion in total tax receipts for the next fiscal year. However, critics warn that these measures could further suppress consumer demand, especially as industries contract and economic activity slows.
The new taxes on food, books, and essentials are part of broader fiscal measures tied to the IMF programme. While the government eyes maximum revenue from these changes, many fear that the policy could exacerbate inflation, push more people below the poverty line, and widen inequality.
