Government Plans Rs 500-600 Billion in New Taxes for FY 2025-26; FBR Target Likely Rs 14.3 Trillion

ISLAMABAD – The government is planning to introduce new taxes amounting to approximately Rs 500 to 600 billion in the upcoming fiscal year 2025-26. The Federal Board of Revenue’s (FBR) target is expected to be set between Rs 14.1 to 14.3 trillion, marking a 16 to 18 percent increase compared to the previous year.

Key proposed tax measures include:

• Taxation of Digital Earners: Income of freelancers, YouTubers, and vloggers will be brought into the tax net. The Institute of Cost and Management Accountants (ICMAP) has proposed a 3.5% tax on social media income, potentially generating Rs 52.5 billion.

• Tax on High Pensions: A tax ranging from 2.5% to 5% is proposed for individuals receiving a monthly pension exceeding Rs 400,000.

• GST on Consumption Basis: General Sales Tax (GST) on sugar and other commodities will now be levied based on rates published by the Pakistan Bureau of Statistics (PBS).

• Increased FED on Processed Foods: A 20% increase in Federal Excise Duty (FED) is anticipated on ultra-processed foods (e.g., fast food, packaged foods), with a target to raise it to 50% by 2030.

• Higher Taxes on Tobacco: Further taxes will be imposed on cigarettes and other tobacco products, alongside a proposal for introducing new health taxes.

• Restrictions on Non-Filers: Under Section 114C, non-filers may be barred from significant transactions like purchasing vehicles or property.

• Petroleum Levy Hike: The Petroleum Development Levy (PDL) will be increased by Rs 5 per liter on both petrol and diesel. PDL is also likely to be imposed on furnace oil.

• Retailer Tax Collection: A minimum of Rs 295 billion is to be collected from retailers, in line with IMF directives.

• FED on Agro-Inputs: Over Rs 30 billion is targeted through increased FED on fertilizers and pesticides.

• Withdrawal of GST Exemptions: GST exemptions provided to various sectors, including FATA/PATA, may be withdrawn.

• Increased GST on Luxury Goods: GST on luxury items such as aircraft, precious jewelry, and high-end mobile phones is expected to rise.

Potential relief measures being considered include:

• Tax relief for the salaried class and the real estate sector.

• A proposal to reduce duties on vehicle imports and set the age limit for imported vehicles at 5 years.

• Subsidies on housing finance are also under consideration to facilitate affordable housing.