ISLAMABAD: Pakistan’s government is awaiting approval from the International Monetary Fund (IMF) for a package of proposed tax relief measures while simultaneously negotiating new revenue-enhancing steps ahead of the federal budget for fiscal year 2026-27.
Officials said discussions with the IMF include proposals for reduced income tax slabs for salaried individuals, a two-percentage-point cut in the Super Tax, withdrawal of a 1 percent advance income tax on exporters, and incentives aimed at revitalising the property sector.
At the same time, authorities are considering raising the General Sales Tax (GST) to the standard 18 percent on solar panels, hybrid vehicles and around two dozen other goods as part of broader revenue mobilisation efforts.
Pakistan has also requested the IMF to maintain concessional GST rates on electric vehicles, arguing that the measure supports energy conservation and aligns with commitments under the $1.4 billion Resilience and Sustainability Facility programme.
Officials confirmed that negotiations with the IMF over tax targets have become increasingly challenging, particularly regarding the Federal Board of Revenue’s (FBR) collection target of Rs15,264 billion for FY2026-27. The revised target follows a downward adjustment to Rs13,428 billion for the current fiscal year ending June 30, 2026.
Sources said actual tax collection is expected to remain around Rs13 trillion in the current fiscal year, meaning the FBR would need to generate an additional Rs2.26 trillion in the next budget cycle to meet the projected target.
Under the proposed reforms, the government is considering reducing tax rates for middle-income salaried groups by up to five percent, subject to available fiscal space agreed with the IMF. Authorities are also evaluating an increase in the taxable threshold for the highest 35 percent income tax bracket.
On corporate taxation, a reduction of the Super Tax from 10 percent to 8 percent has been proposed for selected high-income entities.
In the property sector, the government has proposed reducing transaction taxes to zero for filers, though the IMF is insisting on maintaining a minimum transaction levy of 0.5 to 1 percent for documentation purposes.
On the revenue side, the IMF is pressing Pakistan to shift most items currently taxed at reduced GST rates to the standard 18 percent rate in the upcoming budget. These include a wide range of goods such as textiles, fertiliser inputs, food items, machinery, electronics and vehicles.
The final structure of tax exemptions and adjustments remains under negotiation as Pakistan seeks to balance relief measures with IMF-mandated fiscal consolidation targets.