Pakistan Senate Rejects Carbon Levy: Introduces Digital Presence Proceeds Act

The Senate Standing Committee on Finance and Revenue, led by Senator Saleem Mandviwalla, recently made several key decisions. The Committee rejected proposed carbon levy , introduced Digital Presence Proceeds Act and discussed important financial matters.

The committee rejected the proposed Rs. 2.5 carbon levy in the Financial Bill 2025-26. Senator Mandviwalla emphasized that the Petroleum Division failed to provide a sustainable “Emission Reduction” plan to justify the levy, making its implementation premature and potentially ineffective.

Furthermore, the committee raised strong objections to specific clauses within the “Public Finance Management Act.” These clauses permit autonomous bodies to retain funds and only submit surplus profits into public accounts. The committee argued that this arrangement could lead to financial irregularities and called for these clauses to be rationalized.

Tax Exemptions For Businesses

Discussions also covered tax exemptions for businesses in Khyber Pakhtunkhwa and newly merged districts. It was clarified that exemptions for cinema operators are limited until 2030, providing a five-year exemption from their operational start date. The Federal Board of Revenue (FBR) has also extended withholding tax exemptions for businesses in the erstwhile FATA region until 2026.

Digital Presence Proceeds Act

A significant new development is the “Digital Presence Proceeds Act.” The FBR Chairman, Rashid Mahmood Langrial, highlighted that this act imposes taxes on digital platforms that offer services within Pakistan without maintaining a physical presence in the country. This initiative aims to broaden the tax net to include the digital economy.

Power Sector Circular Debt

NEPRA officials briefed the committee on the power sector’s initiative to address circular debt through refinancing. Currently, consumers are being charged Rs. 3.23 per unit. To facilitate the necessary refinancing for circular debt repayment, NEPRA proposed removing the 10% cap limit on this charge.

The meeting was attended by a number of senators, including Syed Shibli Faraz, Mohsin Aziz, and Anusha Rahman Ahmad Khan, as well as Federal Minister for Finance and Revenue Muhammad Aurangzeb, State Minister for Finance and Revenue Bilal Azhar Kayani, and Chairman FBR Rashid Mahmood Langrial.