Government Seeks Approval for Tax Relief Measures
The federal government is awaiting approval from the International Monetary Fund for key tax relief and policy measures proposed in the upcoming budget 2026–27.
According to officials, the government wants to introduce relief for the salaried class, exporters and the property sector. The proposals include reducing tax slabs for salaried individuals, cutting the super tax by 2 percent and abolishing the 1 percent advance income tax on exporters.
The government is also considering major relief measures for the property sector. These steps are aimed at easing pressure on taxpayers, encouraging business activity and supporting investment at a time when the economy remains under fiscal stress.
However, the final shape of the relief package will depend on IMF approval. Pakistan is currently engaged in discussions with the Fund over revenue measures, tax exemptions and the next fiscal year’s tax collection target.
GST Increase Under Discussion
Officials said talks are also underway with the IMF regarding the imposition of the standard 18 percent General Sales Tax on several product categories.
These categories reportedly include solar panels, hybrid vehicles and nearly two dozen other items. The move is being discussed as part of efforts to broaden the tax base and increase revenue collection.
At the same time, Pakistan has requested the IMF to allow lower GST rates on electric vehicles. The government argues that electric vehicles should receive policy support because they promote environmental sustainability, reduce fuel dependence and improve energy efficiency.
This request has been made under the Resilience and Sustainability Facility linked to a $1.4 billion IMF programme. The facility focuses on climate resilience, energy conservation and long-term sustainability reforms.
Revenue Target Remains Major Challenge
The government is also facing difficulty in finalising the Federal Board of Revenue’s target for the next fiscal year.
Official sources said the FBR’s tax target for the current fiscal year ending June 30, 2026, has been revised downward to Rs13,428 billion. This has made it more challenging to set a much higher target of Rs15,264 billion for 2026–27.
The IMF wants Pakistan to maintain fiscal discipline and strengthen revenue collection. However, the government also wants to provide relief to key sectors and taxpayers.
This has created a difficult balancing act before the budget announcement.
If the IMF approves the proposed relief measures, the government may present the budget as business-friendly and people-focused. But if the Fund insists on stronger revenue measures, several relief proposals may be revised or reduced.
The final budget is expected to reflect the outcome of these negotiations.
For now, the government is trying to secure IMF support while managing public expectations, business concerns and the country’s strict fiscal targets.
