The Federal Board of Revenue (FBR) is preparing to unveil a series of major tax reforms in the upcoming federal budget for FY2025–26, aimed at boosting revenue collection and aligning with the International Monetary Fund’s (IMF) fiscal targets. According to sources, the proposed changes will be presented to the IMF delegation arriving for negotiations starting May 14, with the final budget due for announcement on June 2.
One of the key proposals includes increasing the withholding tax rate on online marketplace transactions. Platforms such as Daraz, OLX, Zameen, and PakWheels currently face a 0.25 percent withholding tax, which may be raised in the next fiscal cycle. This measure is part of a broader strategy to widen the tax base and enhance digital economy compliance.
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In an effort to restore investor confidence and reduce corporate tax burdens, the FBR is also considering a gradual rollback of the 10 percent super tax imposed on large corporations. This levy, heavily contested in sectors like banking, cement, oil, and tobacco, has raised effective corporate tax rates to nearly 39 percent. Officials believe the removal of this tax could free up over Rs. 200 billion currently entangled in legal disputes.
Significant relief is on the horizon for the salaried class, with the government proposing to increase the tax-free monthly income threshold from Rs. 50,000 to Rs. 80,000. This adjustment would exempt individuals earning up to Rs. 960,000 annually from paying income tax. Additionally, a 10 percent surcharge on high-income earners with monthly earnings above Rs. 10 million may be eliminated, offering further fiscal reprieve.
However, not all proposals are without controversy. The government is evaluating the imposition of a 5 percent income tax on pensioners, a move that has triggered concern among retired employees and advocacy groups. This potential tax could impact thousands of retirees relying on fixed incomes.
Other reforms under review include tax incentives for manufacturers and real estate developers. These include scrapping withholding taxes on the import of raw materials and reducing taxes on property transactions. In the automotive sector, while imported vehicles could benefit from duty cuts, locally assembled cars with engine capacities above 1300cc might face higher taxes.
Despite these proposed initiatives, the government faces an uphill battle in achieving its ambitious Rs. 12.3 trillion revenue target. The upcoming IMF discussions are expected to concentrate on ensuring credible reforms, enforcing digital tax compliance, and laying a sustainable foundation for long-term revenue growth.
