Pakistan is considering a series of targeted tax measures as part of a contingency plan to meet revenue targets and adhere to the conditions of its $7 billion International Monetary Fund (IMF) bailout programme. The government has committed to implementing additional taxes worth Rs. 200 billion in January 2026 if revenue collection falls short or expenses exceed agreed thresholds during the first half of the fiscal year.
According to reports, the proposed measures focus on increasing income tax rates on mobile and landline calls, as well as raising withholding tax on cash withdrawals from banks. These actions are designed to activate only if the Federal Board of Revenue (FBR) fails to meet its end-December collection targets or if government spending surpasses the agreed limits with the IMF.
In addition to these targeted measures, authorities are exploring an increase in sales tax on solar panels from 10% to 18%, expansion of the federal excise duty (FED) to include confectioneries and biscuits, and a potential rise in the standard sales tax rate to 19%, which could yield Rs. 225 billion annually. However, the current priority is on focused measures involving withholding tax, sales tax, and FED adjustments.
The FBR is facing challenges in achieving its targets, having reported a Rs. 198 billion shortfall in the first three months of the fiscal year. As of October 29, total tax collection stood at Rs. 3.65 trillion, leaving the agency needing Rs. 460 billion more within 48 hours to meet its four-month target.
Among the proposed actions, the withholding tax on cash withdrawals for non-filers may be increased from 0.8% to 1.5%, potentially generating Rs. 30 billion annually. Similarly, withholding tax on landline calls could rise from 10% to 12.5%, expected to bring in Rs. 20 billion, while the tax on mobile calls may increase from 15% to 17.5%, projected to yield Rs. 24 billion per year. Additionally, a 16% FED on confectioneries and biscuits is under consideration, potentially raising Rs. 70 billion annually. Accounting for sales tax and other levies, the effective tax on processed foods could reach 38%.
The government’s contingency plan comes as provinces like Sindh and Punjab defer collection of agriculture income tax at enhanced rates of up to 45% for one year. Meanwhile, the FBR’s broader efforts to expand the tax base remain limited, suggesting that existing taxpayers may bear the majority of the new fiscal measures.
The IMF has maintained Pakistan’s annual primary budget surplus target of 1.6% of GDP, or Rs. 2.1 trillion, while promising to review the target after final flood loss estimates. In parallel, the World Bank has revised Pakistan’s economic growth forecast upward to 3%, citing less severe flood losses than initially anticipated.
The government expects to recover approximately half of the proposed Rs. 200 billion in additional taxes during January-June 2026, contingent on approvals and IMF agreement on fiscal targets, underlining the critical role of these measures in maintaining fiscal stability.
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