Pakistan to Introduce Tax Reforms in Upcoming Budget, IMF to be Consulted

Karachi: Negotiations between Pakistan and the International Monetary Fund (IMF) regarding the budget for the next financial year are set to begin next week. The budget will include a decision to bring retailers, wholesalers, and various sectors under the tax net. A proposal to remove tax exemptions for high pensioners is also under consideration.
According to reports, during these discussions, the IMF will be consulted on tax reforms included in the budget. Proposed measures include the withdrawal of tax exemptions for economic zones, the imposition of a carbon levy on petrol and diesel, and providing incentives for electric vehicles.
Sources indicate that work on tax proposals for the upcoming fiscal year 2025-2026 is progressing rapidly. Negotiations with the IMF’s technical delegation are expected to begin next week, with officials from the Ministry of Finance and the Federal Board of Revenue (FBR) participating.
A decision has been made to not grant tax incentives to new economic and export processing zones, while the benefits for existing special economic zones will be phased out by 2035.
A proposal has been put forward under the climate financing program to impose a carbon levy of five rupees per liter on petrol and diesel. Consultations will take place with the IMF regarding the limits of the carbon levy and its implementation process, with the levy set to be incorporated into the next Finance Act.
The new budget also considers promoting the use of electric vehicles (EVs). A proposal includes providing subsidies on EVs while imposing additional taxes on vehicles that emit harmful pollutants. Additionally, preparations are underway to introduce a five-year National Electric Vehicle Policy, under which EV charging stations will be set up nationwide.
Retailers, wholesalers, and other sectors are being brought under the tax net, and the exemption on pensions for those receiving higher amounts is also being reconsidered as part of these reforms.