ISLAMABAD: The revised Finance Bill 2025–26, which introduces new thresholds for transactions by “ineligible persons” and sharpens tax enforcement mechanisms, may face resistance from the International Monetary Fund (IMF), as Pakistan attempts to raise an additional Rs389 billion in revenues without compromising on its Rs14.131 trillion revenue target.
Presented ahead of its final reading in the National Assembly, the revised bill has been trimmed down from 355 to 348 pages and includes several significant amendments. These changes—made during the parliamentary review for the first time by the National Assembly’s Finance Committee—are part of the government’s efforts to close a funding gap identified under the IMF’s $7 billion Extended Fund Facility (EFF).
Key Provisions Likely to Be Contested by IMF:
Vehicle Purchases
Any buyer of a locally manufactured or imported vehicle valued over Rs7 million will now be classified as an “ineligible person” and required to submit their latest tax return at the time of booking, purchase, or registration.
Immovable Property
Registration or transfer of property valued above Rs100 million (fair market value) will also require similar documentation to verify financial standing.
Capital Market Investments
Investments exceeding Rs50 million in securities, mutual funds, or money market instruments must be new capital, excluding reinvestments of previously held securities or earnings.
Bank Withdrawals
An individual withdrawing over Rs100 million annually across all bank accounts will fall under the ineligible category and face closer scrutiny.
Cross-Matching of Tax and Bank Data
Section 175AA of the revised bill allows the Federal Board of Revenue (FBR) to access banking information to cross-match with declared tax data using data algorithms. The banks will be required to share discrepancies for further investigation. All such information will be used solely for tax-related purposes and held confidentially.
Action Against Counterfeit Goods
Revenue officials ranked Naib Tehsildar (BPS-16) and above can now be empowered to seize counterfeit goods or those under tax monitoring as per Section 45A. This enhances the FBR’s capacity to enforce tax laws in the retail and informal sectors.
Digital Advertising Tax
The bill introduces a 5% digital services tax on foreign vendors and social media platforms with a digital presence in Pakistan.
- Tax is to be withheld by foreign vendors or intermediaries and deposited by the 7th of the following month.
- Social media platforms must file quarterly statements detailing ad revenue from Pakistani clients.
- Non-compliance will invite penalties of Rs1 million per instance.
- In cases of prolonged tax evasion (120 days), payment intermediaries are mandated to suspend remittances to the foreign advertiser.
Potential IMF Pushback
Sources indicate that the IMF is closely examining the bill’s revised enforcement provisions and their potential impact on projected revenues. Officials fear the softer language and relaxed implementation timelines may fall short of IMF benchmarks for fiscal discipline.
The government is expected to defend its position by arguing that the bill enhances compliance without disproportionately affecting legitimate economic activity, especially in a high-inflation environment.
Economic Context
Pakistan’s gross foreign exchange reserves recently dipped below $10 billion after commercial debt repayments to China, although the figure is expected to rebound following fresh inflows. Amid these pressures, the revised finance bill is a crucial test of Islamabad’s fiscal credibility in the eyes of international lenders.
Next Steps
The revised bill is set to be tabled before the National Assembly within the next two days. Meanwhile, the IMF will likely assess whether the proposed legal instruments are sufficient to ensure fiscal consolidation and transparency—both key components of the current lending program.
