As Pakistan prepares its Budget 2025–26, consultations with the International Monetary Fund (IMF) are ongoing regarding various tax proposals aimed at boosting revenue while supporting key sectors of the economy.
According to official sources, the government is considering a reduction in taxes on vehicles and auto parts. The current 2% additional customs duty on parts may be brought down to zero. There are also proposals to gradually reduce customs duty slabs ranging from 4% to 7%.
For vehicles, a 20% reduction in existing duties—which currently range between 15% to 90%—is under discussion.
To encourage industrial growth and enhance exports by up to $5 billion, the government is likely to reduce taxes on raw materials used in various industries, including textiles, chemicals, auto parts, plastics, iron, and steel. A reduction in duties on industrial raw materials and semi-finished goods is also being planned.
Additionally, a 0.5% reduction in the withholding tax on property transactions is expected.
The proposed tax revenue target for the Federal Board of Revenue (FBR) next year is Rs 14.305 trillion. Of this, Rs 600 billion is expected to come from improved enforcement of existing laws, and another Rs 400 billion from new policy measures.
Sources further reveal that taxation on agricultural income is planned to begin from July 1, 2025.
Meanwhile, the IMF is urging Pakistan to broaden its tax base and document more of the economy to achieve sustainable revenue growth.
