The Senate Standing Committee on Finance on Thursday rejected both the imposition of a carbon levy on petroleum products—a requirement of the International Monetary Fund (IMF)—and a tax on small cars, as proposed in the budget for FY2025-26.
The proposed federal budget had sought the imposition of a Rs. 5/liter carbon levy on petroleum products over the next two years, generating an estimated Rs. 45 billion in revenue. The Senate panel, chaired by Senator Saleem Mandviwalla, rejected this. The carbon levy is part of Pakistan’s commitments under the IMF’s new Resilience and Sustainability Facility (RSF).
Senator Sherry Rehman said the levy would burden the common man and required separate legislation. She suggested imposing such taxes on industries with high carbon emissions as part of a broader climate strategy.
Similarly, the committee rejected a proposed tax on small cars, with Rehman saying vehicle registration and taxation are provincial matters.
During the meeting, Federal Board of Revenue (FBR) Chairman Rashid Langrial informed the senators that the federal government had decided to abolish tax exemptions for Special Economic Zones (SEZs) and Special Technology Zones (STZs) in accordance with the IMF conditions. He said the IMF deal called for the phasing out of all tax exemptions by 2035, adding no SEZ or STZ would receive any tax relief in future.
The committee also reviewed proposed changes to property taxation. FBR officials said the withholding tax on property sales valued at Rs. 100 million has been increased from 8% to 9.5%, while properties worth less than Rs. 100 million would be taxed at 8.5%. For properties valued below Rs. 50 million, the rate would be 7.5%. The committee approved a proposal to impose a 5 per cent tax on foreign online platforms.
Similarly, they approved new taxes on high-value pensions exceeding Rs. 10 million and the income of international athletes. However, it rejected the surcharge cap removal, arguing it would escalate costs for energy consumers.