The National Assembly Standing Committee on Finance and Revenue has approved a series of major tax reform proposals, including a new withholding tax on social media earnings, mandatory electronic filing of income tax returns, and relief measures for exporters.
During its review of budget-related tax proposals, the committee approved a 5 percent withholding tax on income earned through social media platforms such as YouTube. According to Federal Board of Revenue (FBR) officials, the tax will be deducted when foreign currency payments are transferred through banks to content creators and digital earners in Pakistan.
FBR officials informed the committee that Pakistan’s social media economy is generating up to Rs. 10 billion annually, making it an increasingly important source of taxable income. Under the proposed mechanism, banks will act as withholding agents and deduct the tax at the time of payment.
In a move aimed at supporting the export sector, the committee also approved the abolition of the existing 1 percent advance tax on exporters. The measure is expected to improve liquidity and reduce the tax burden on export-oriented businesses.
The committee further approved a proposal to make electronic filing of income tax returns mandatory for all taxpayers. Under the new framework, returns must be submitted electronically through the IRIS portal, ending the practice of manual return filing.
FBR officials said that while manual filing has largely been phased out since 2013, some returns were still being submitted manually in a few cities, including Gujranwala. The approved proposal seeks to complete the transition to a fully digital tax filing system.
As part of the digitalization drive, companies will also be required to submit their financial statements in a machine-readable format, enabling greater automation and efficiency in tax administration.
The committee additionally approved a proposal allowing taxpayers who opt for the algorithmic settlement mechanism to file revised tax returns without obtaining prior approval from a tax commissioner. Taxpayers using the mechanism will also be exempt from separate penalties and surcharges associated with the settlement process.
The approved measures form part of the government’s broader tax reform agenda aimed at expanding the tax base, improving compliance, reducing human intervention, and modernizing Pakistan’s tax administration system through technology-driven solutions.
