With the Government of Pakistan set to unveil the federal budget for fiscal year 2025-26 on June 2, reports suggest a slew of new taxation measures aimed at generating an additional Rs. 500-600 billion in revenue.
Among the proposed measures is a 2.5-5% tax on monthly pensions exceeding Rs. 400,000, with an aim to boost revenues by Rs. 20-40 billion. A similar measure was considered last year, but was ultimately unimplemented. “We believe the government will impose this tax in the FY26 budget,” said an analyst at Topline Securities in a research note.
Pakistan’s overall pensions costs reached Rs. 673 billion in the first nine months of the ongoing fiscal year, with annual expenditures projected at Rs. 0.9-1 trillion.
GST Adjustments
The Pakistan Bureau of Statistics (PBS) has already revised upwards the price benchmarks for calculating general sales tax (GST) on certain commodities, including cement and sugar. Previously, GST on sugar was levied at Rs. 72.22/kg, despite market prices exceeding Rs. 150/kg in violation of vows to maintain prices at lower levels. This modification would likely generate an additional Rs. 70-80 billion annually and be formalized in the FY26 Finance Bill.
Health Tax
To promote public health and combat obesity, diabetes and cardiovascular diseases, the government is considering imposing a 20% increase in the federal excise duty (FED) on ultra-processed foods such as biscuits and snacks. The long-term goal is to raise the FED to 50% by FY29. A similar hike in cigarette taxes is also expected, which experts have warned will prove ineffective so long as the government cannot curtail the illicit trade of cigarettes.
Non-filers
Authorities have informed the International Monetary Fund (IMF) that a bill has been submitted to Parliament to restrict non-filers from major economic transactions, including vehicle and real estate purchases. A Senate panel has already reviewed the proposal, but difficulty persists in its implementation pending technological upgrades to the FBR’s system.
For now, analysts predict Section 114C would be introduced into the tax laws through the budget to implement the decision.