Islamabad: The federal government is awaiting the International Monetary Fund’s (IMF) approval on a range of tax measures and relief proposals as it finalizes Pakistan’s federal budget for the fiscal year 2026-27. Among the most significant proposals under consideration are tax cuts for salaried individuals, a reduction in super tax, incentives for exporters, and relief measures for the property sector.
According to government sources, discussions with the IMF are continuing as Pakistan seeks to balance public relief measures with the fiscal discipline required under its ongoing economic reform program.
Relief Proposed for Salaried Employees
One of the key budget proposals focuses on reducing the tax burden on the salaried class, which has repeatedly expressed concerns about rising taxation amid inflationary pressures and increasing living costs.
The government has proposed lowering income tax slabs for salaried individuals, a move that could provide meaningful relief to millions of workers across the country. The proposal is being viewed as an effort to address growing criticism that salaried taxpayers bear a disproportionately large share of the direct tax burden.
Officials believe that reducing tax rates for middle-income earners could help increase disposable income and support consumer spending while easing financial stress on households.
Super Tax Reduction Under Consideration
The government has also proposed a 2 percent reduction in super tax, which is currently imposed on high-income companies and individuals.
Business groups have long argued that the super tax discourages investment and reduces competitiveness. A reduction in the rate could provide relief to corporations and potentially encourage expansion and job creation.
However, any reduction in tax revenues must be balanced against Pakistan’s fiscal commitments under IMF-supported economic programs, making approval from the lender a crucial factor.
Export Sector May Receive Incentives
Another proposal being discussed involves eliminating the 1 percent advance income tax imposed on exporters.
Exporters have frequently complained that advance taxes negatively affect cash flow and increase the cost of doing business. Government officials believe removing the levy could strengthen export competitiveness and support foreign exchange earnings.
The export sector remains a critical component of Pakistan’s economic strategy, particularly as the country seeks to improve its trade balance and increase dollar inflows.
Major Relief Suggested for Property Sector
The property and real estate sector is also expected to receive significant concessions under the proposed budget framework.
Although details are still being finalized, officials say the government is considering measures aimed at stimulating investment in real estate and construction activities. The sector is widely regarded as a major contributor to employment and economic activity, and policymakers hope that targeted incentives could help revive growth.
GST Increase on Several Items
While relief measures are being considered in some sectors, discussions are also underway regarding higher taxation on certain products.
According to reports, the government and IMF are negotiating plans to increase the General Sales Tax (GST) to the standard rate of 18 percent on solar panels, hybrid vehicles, and nearly two dozen other categories of goods.
The proposed increase has generated concern among consumers and industry stakeholders, particularly because solar energy products have become increasingly popular amid rising electricity costs and energy shortages.
Pakistan Requests Concession for Electric Vehicles
Pakistan has requested the IMF to allow a reduced GST rate for electric vehicles (EVs), arguing that such incentives are necessary to promote environmentally friendly transportation and energy efficiency.
The request has been made within the framework of the IMF’s Resilience and Sustainability Facility (RSF), a program through which Pakistan is receiving approximately $1.4 billion to support climate resilience and sustainable economic reforms.
Government officials argue that maintaining lower taxes on EVs would help reduce dependence on imported fuels, lower emissions, and support long-term energy security objectives.
Revenue Targets Present a Major Challenge
A major challenge facing policymakers is achieving ambitious tax collection goals while simultaneously providing relief to businesses and taxpayers.
Senior government officials have acknowledged that negotiations with the IMF have become increasingly complex due to the difficulty of meeting revenue targets.
According to official figures, the Federal Board of Revenue (FBR) has revised the current fiscal year’s tax collection target, lowering it to Rs 13.428 trillion for the year ending June 30, 2026.
For the upcoming fiscal year, however, the government and IMF are discussing a significantly higher target of approximately Rs 15.264 trillion.
Experts note that increasing tax revenues by such a large margin while also reducing certain taxes and providing exemptions will require careful fiscal planning and potentially new revenue-generating measures.
Budget Announcement Expected Soon
The federal budget for fiscal year 2026-27 is expected to be presented shortly, and many of the final decisions will depend on the outcome of ongoing discussions with the IMF.
Economists believe the budget will attempt to strike a delicate balance between maintaining economic stability, meeting international commitments, supporting growth, and providing relief to citizens facing inflation and rising costs.
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