In a move that underscores Pakistan’s fiscal stress, the government is exploring major tax increases, targeting mobile phone usage, solar panel imports, and cash withdrawals, as part of a wider plan to meet revenue commitments under its IMF programme. The FBR is already facing a sizeable shortfall, prompting the administration to signal contingency measures if targets remain unmet.
Officials familiar with the matter have hinted that Pakistan’s revenue shortfall, coupled with commitments under ongoing financial programs, has prompted the government to seek new sources of income.
Economic analysts suggest that non-filers and high-cash-usage segments remain major gaps in the tax net, and these new measures appear to focus on closing those loopholes.
The FBR collected approximately Rs 2,885 billion in the first quarter (July-September 2025-26), falling short of the assigned target of about Rs 3,083 billion by Rs 198 billion.
As of 29 October 2025, tax collections stood at about Rs 3,650 billion, leaving the board roughly Rs 460 billion shy of its four-month goal.
Pakistan’s tax-to-GDP ratio rose from 8.8% in 2023-24 to 10.24% in 2024-25, reflecting some progress, though the budget numbers still lag.
IMF & Commitment Pressures
Under its US$7 billion IMF bailout programme, Pakistan has committed to additional tax measures of around Rs 200 billion to fill the revenue gap.
Officials have also flagged the requirement to maintain a primary budget surplus of 1.6% of GDP (roughly Rs 2.1 trillion) as part of the IMF conditionalities.
Proposed Tax Revisions
While the Finance Ministry has not yet issued an official notification, multiple reports indicate the following proposals are under review:
- Mobile Recharge Tax: An increase from 15% to around 17.5%, potentially affecting millions of prepaid and postpaid users nationwide.
- Solar Energy Imports: A possible rise in sales tax from 10% to 18%, which could raise costs for households and businesses investing in renewable energy.
- Cash Withdrawals (Non-Filers): A hike in advance tax from 0.8% to 1.5%, aimed at discouraging undocumented cash transactions.
If approved, these changes would have ripple effects across sectors, from telecom and banking to renewable energy, impacting both consumers and businesses.
Public and Industry Reaction
The telecom sector has expressed concern about a potential hike in the mobile recharge tax, warning that higher call and data costs could reduce usage, particularly among lower-income consumers.
Renewable energy advocates have also voiced alarm, stating that increasing sales tax on solar equipment contradicts Pakistan’s clean energy ambitions and could slow adoption in residential areas.
Citizens, already burdened by inflation and rising utility prices, have taken to social media to criticize the government’s focus on indirect taxation. Many argue that such measures disproportionately affect the middle class and small businesses.
Awaiting Official Confirmation
As of now, no official gazette or FBR circular has confirmed these proposed rates. The government is expected to review the recommendations in consultation with the Ministry of Finance, the Federal Board of Revenue (FBR), and key stakeholders before any formal decision is made.
Observers expect that any new tax measures, if approved, may be included in the Mini Budget or Finance (Supplementary) Bill 2025 in the coming months.
Economic Analysts’ Take
Experts say the government’s focus appears to be short-term revenue enhancement rather than structural reform. “Indirect taxes are easier to collect but harder on consumers,” noted one economist. “Sustainable tax growth should come from broadening the income tax base and digitizing transactions rather than taxing essentials like communication or clean energy.”
For the government, the shortfall puts pressure to raise new taxes, cut development spending, or negotiate relaxed targets with the IMF. For taxpayers, especially prepaid mobile users, solar adopters, cash-dependent individuals, and non-filers, the risk of higher indirect taxes is now quite real.
Economists caution that while raising taxes can temporarily fill revenue gaps, the long-term solution lies in broadening the tax base, improving compliance, and digitalising transactions.
by PK Tax Calculator