In a significant move to broaden the tax base and meet International Monetary Fund (IMF) conditions, the federal government of Pakistan is planning sweeping tax reforms in the upcoming fiscal year 2025–26 budget, targeting unconventional income sources such as freelancers, social media influencers, and high-earning pensioners. The proposed measures, estimated to generate up to Rs. 600 billion in additional revenue, reflect an aggressive approach to shore up public finances amidst growing expenditure and fiscal pressures.
According to market intelligence shared by Topline Securities, one of the most discussed proposals includes a 3.5 percent tax on income earned through social media platforms such as YouTube, TikTok, and Instagram. The move is expected to generate approximately Rs. 52.5 billion, signaling a shift toward regulating and monetizing Pakistan’s expanding digital economy, which has largely remained outside the formal tax net.
In a parallel initiative, the government is considering imposing a tax on pensions exceeding Rs. 400,000 per month. The proposed tax rate ranges between 2.5 percent and 5 percent, with potential revenue generation of Rs. 20 to 40 billion. With pension disbursements having already reached Rs. 673 billion this year and projected to surpass Rs. 1 trillion, the measure aims to tax only higher-income pensioners while addressing a growing public expenditure burden.
Another key area of reform targets consumption-related taxes. The government is planning to align the General Sales Tax (GST) on selected items with actual market prices, as reported by the Pakistan Bureau of Statistics. One example is sugar, where the GST is currently calculated at a notional value of Rs. 72.22 per kilogram, while the market price is closer to Rs. 150. Adjusting this discrepancy could add Rs. 70 to 80 billion to the exchequer.
Additional proposals include a 20 percent hike in federal excise duty on processed foods such as snacks and biscuits, as part of a gradual plan to raise the duty to 50 percent by 2029. There is also likely to be another increase in the excise duty on cigarettes, which has historically been a reliable source of tax revenue.
To ensure broader tax compliance, the government has submitted legislation to eliminate the category of non-filers. If enacted, non-filers will be barred from purchasing vehicles and real estate. A new section, 114C, is expected to be introduced in the Income Tax Ordinance, potentially with threshold adjustments to define taxable entities more clearly.
In energy taxation, a petroleum development levy on furnace oil is under review, along with a proposed Rs. 5 per liter increase in the levy on petrol and diesel under the pretext of a carbon tax. Depending on how the rates are structured, this could yield an additional Rs. 35 to 80 billion.
The government is also under pressure from the IMF to collect Rs. 295 billion from retailers by the end of 2025. To meet this target, an increase in advance taxes on distributors is being explored.
Lastly, the IMF has suggested a 5 percent hike in federal excise duty on fertilizers and pesticides, a move that could raise over Rs. 30 billion. While such a measure could impact agricultural input costs, the government appears committed to meeting its fiscal goals in order to secure ongoing IMF support.
As budget deliberations continue, these proposals reflect a strategic pivot to diversify the government’s revenue sources and formalize previously untaxed economic segments. Whether these measures will be politically and socially viable remains to be seen, but the urgency of revenue generation is shaping a bold and expansive fiscal policy for FY26.