Islamabad, May 18, 2025: In a bid to meet ambitious fiscal goals, Pakistan and the International Monetary Fund (IMF) are locked in discussions over sweeping new tax measures aimed at collecting an additional Rs. 700 billion in the upcoming 2025–26 federal budget.
The push comes as both sides work to align on a revenue target of Rs. 14.307 trillion—significantly higher than current projections.
“Pakistan and IMF tax measures” has become a hot topic as the government considers reforms across several sectors, including salaried individuals, tobacco, and beverages.
Proposed changes include revised income tax slabs for the salaried class, where the IMF has raised red flags against reduced tax rates for middle-income earners earning between Rs. 200,000 and Rs. 400,000 monthly.
The IMF argues such relief could hinder overall revenue performance.
In the tobacco sector, policymakers are expected to raise the Minimum Legal Price (MLP) per cigarette pack—currently set at Rs. 162.25—without altering the two-tier federal excise duty system.
Industry data suggests that over 80% of cigarette brands are currently sold near or below the MLP, making price enforcement a key concern.
To tackle this, authorities are considering strict monitoring of advance tax collection at Green Leaf Threshing (GLT) units where raw tobacco is processed.
Meanwhile, the Federal Board of Revenue (FBR) is at odds with industry stakeholders over potential tax relief for beverages.
Read More: FBR Proposes Tax Relief for Salaried Class in FY26 Budget, Pending IMF Approval
The FBR is resisting reductions in tax rates, fearing that any cuts may lead to a surge in refund claims—something the IMF is also wary of.
Questions remain about how these refunds would be managed within the already strained fiscal framework.
The Finance Ministry has placed the FBR’s revenue baseline for FY26 at Rs. 13.556 trillion.
However, the IMF estimates a more conservative Rs. 13.2 trillion, signaling a potential shortfall of around Rs. 300 billion.
To hit the Rs. 14.307 trillion target, the government would need to implement fresh tax measures and ramp up enforcement mechanisms to close the Rs. 700 billion gap.
The Annual Plan Coordination Committee (APCC) is scheduled to meet on May 26 to iron out the final contours of the country’s macroeconomic and development roadmap for the fiscal year ahead.
As Pakistan and IMF tax measures negotiations intensify, the decisions made in the coming weeks could reshape the financial landscape for businesses and citizens alike.
Will the government strike a balance between revenue demands and taxpayer relief—or lean into austerity? Stay tuned as the budget countdown begins.
