The federal government is poised to introduce new tax measures in the upcoming budget for fiscal year 2025-26, aiming to generate an estimated Rs600 billion in additional revenue. These measures are expected to target previously less-taxed segments, including high-income pensioners, individuals earning from social media platforms, and certain processed food items.
According to a report by Topline Securities, a well-known financial services company, the government is reviewing a proposal to increase the tax rate on monthly pensions exceeding Rs400,000 from 2.5% to 5%. If approved, this single measure could yield between Rs20-40 billion in revenue. Similarly, a proposed 3.5% tax on social media earnings from platforms like YouTube and TikTok is under consideration, with projections suggesting it could generate around Rs52.5 billion.
Higher Taxes on Processed Goods
The government also plans to align the Goods and Services Tax (GST) on certain goods with current market prices, utilizing data from the Pakistan Bureau of Statistics. Furthermore, a proposal to increase Federal Excise Duty (FED) on processed foods such as snacks and biscuits by 20% is being reviewed, while excise duties on cigarettes are also expected to see an increase in the upcoming budget.
Expected Restrictions on Non-Filers
As Budget 2025-26 approaches, intense focus remains on decisions related to non-filers, as the incumbent government continues its desperate efforts to boost tax revenue. In the latest round of talks with the International Monetary Fund (IMF), the Pakistani government is finalizing new measures designed to bring non-filers – a large segment including some business owners, high-paid individuals, and others – into the tax net.
Under new proposals, individuals who fail to register themselves under the tax net may face significant restrictions, potentially including limitations on the purchase of vehicles and property. This initiative comes as Pakistan continues negotiations with the global lender to secure the next tranche of its loan program, with the Fund demanding robust reforms to enhance fiscal discipline and broaden the country’s narrow tax base.
IMF Demands and Compliance Efforts
Under the latest considerations, the government is planning to tighten the terms of its fiscal facility, citing emerging global risks such as increased tariffs from the US and escalating regional tensions. The IMF has further called for hikes in electricity and gas tariffs and a phased withdrawal of existing tax concessions.
With these anticipated changes, the government intends to effectively end the “non-filer” designation from its tax code. It also plans to utilize information from external sources like banks and businesses to identify individuals or companies that may be evading taxes, thereby helping to track down those outside the tax net.
To support this effort, a new system called the Compliance Risk Management System (CRMS) is being introduced. This system will assist tax authorities in identifying and focusing on individuals who are deemed more likely to breach tax laws. In recent times, the government has also expressed plans to expand this system to monitor large companies through their corporate tax departments, aiming to make the overall tax system more efficient and fair.
Officials from the country’s apex tax collection authority also revealed that although the “Tajir Dost Scheme” did not achieve its full intended impact, there was a 51% surge in tax filers within the trader and wholesaler segments after a tweak in withholding tax on unregistered businesses.
Sources involved in budget talks confirm that the government, under IMF advisement, has decided to significantly widen the tax base and enforce strict actions against those who fail to register and file taxes. These comprehensive measures are widely expected to be officially announced in the federal budget for the upcoming fiscal year.
