Laws & Taxes

Starting September 6, the Punjab Environmental Protection Agency (EPA) will prohibit businesses from charging customers for plastic bags. This mandate aims to stop retailers from profiting off plastic, which has discouraged the use of eco-friendly alternatives. While plastic bags must now be provided for free, businesses are still permitted to charge for reusable or recyclable non-plastic options. Violators face fines up to Rs50,000, potential store closures, and legal action.

President Asif Ali Zardari has enacted the Finance Act 2026, launching a comprehensive suite of tax and tariff measures that took effect on July 1, 2026. The legislation aims to achieve a tax collection target of PKR 15,264 billion for the 2026-27 fiscal year by generating PKR 1.02 trillion through enhanced enforcement, digitalization, and new tax levies. While introducing higher taxes on luxury items and specific sectors, the Act also provides PKR 143.4 billion in import-stage tax relief through adjusted duties and removed exemptions. Key initiatives include the Retailer Formalisation Scheme, supply chain digitalization, and the use of algorithmic tax assessment to broaden the revenue base.

A survey by the Press Network of Pakistan (PNP) reveals that most Pakistanis support the government’s proposed 5% withholding tax on social media influencers, agreeing that creators should contribute to the national tax system. However, respondents emphasized the need for a balanced approach, strongly favoring income-based exemptions for small creators and the implementation of government incentives to support digital entrepreneurship. While there is concern that the tax could discourage young talent, the public generally views this measure part of the Finance Bill 2026—as a necessary step to bring the growing digital economy into the formal tax net.

In the 2026-27 budget, the government has introduced a 20% reduction in regulatory duty on high-end imported mobile phones, effective July 1, 2026, which will lower costs by Rs. 14,000 per device. However, the FBR Chairman advises against broader duty cuts, arguing that premium imports are purchased by affluent consumers and that current tax structures are vital for revenue, with flagship phones contributing 58% of import tax revenue despite making up only 16% of units. Instead, the FBR is prioritizing support for the local assembly industry which serves 95% of the market and recommends that future tax relief be strictly limited to entry-level phones in the $31–$200 range to assist price-sensitive buyers.

The Islamabad High Court has issued an interim order suspending property tax collection by the Metropolitan Corporation Islamabad (MCI). This ruling follows a petition challenging the legal validity of Gazette Notification No. 404(1)-4/2024 and specific tax bills issued in April 2026. The petitioners argue that the MCI lacks the authority to levy this tax, noting that the notification was issued by an administrator rather than an elected body, in potential violation of the Islamabad Capital Territory Local Government Act of 2015 and the Urban Immovable Property Tax Act of 1958. The court found a prima facie case for relief and has stayed the collection of these tax bills for all affected property owners until the next hearing in four weeks.

The Federal Board of Revenue (FBR) has uncovered significant tax underreporting among high-net-worth individuals and property buyers during its review of the Finance Bill 2026. Financial data analysis revealed that approximately 8,697 individuals held collective bank deposits of PKR 750 billion while reporting zero taxable income. Furthermore, nearly 80 percent of top property buyers materially underreported their bank deposits in tax filings, and 98.9 percent of high-deposit individuals failed to accurately report their financial inflows. In response, the FBR is working to strengthen data integration with the State Bank of Pakistan (SBP) to improve transaction monitoring and expand the tax base. Meanwhile, the Senate Standing Committee on Finance and Revenue has criticized past tax system "experiments," and the FBR has agreed to a proposed audit of policy actions taken over the last decade to help identify patterns of elite capture within the system.

The Budget 2026-27 introduces a strategic tax relief package designed to stimulate the real estate and construction sectors by lowering transaction costs and addressing industry grievances. Key reforms include a 50% reduction in withholding tax rates for active tax filers—dropping to 1.25% for buyers and 2.75% for sellers—alongside the formal repeal of Section 7E. By eliminating this controversial "deemed income" tax, which was recently ruled unconstitutional, the government aims to restore investor confidence, encourage market activity, and foster a more favorable environment for property development and investment.

The Punjab government has mandated that all provincial, regional, and district public offices transition entirely to the E-Filing and Office Automation System (e-FOAS) by July 1, effectively banning manual paper correspondence. This structural shift, overseen by the Punjab Information Technology Board, is expected to save billions in administrative costs while improving transparency, reducing processing delays, and accelerating the resolution of public grievances. Additionally, the Chief Secretary acknowledged the successful efforts of administrative teams in meeting solid waste management targets during the recent Eid-ul-Azha holiday.

The Pakistan Freelancers Association (PAFLA) has urged the government to maintain the 0.25% tax rate on foreign exchange earnings for the next decade to support the country's growing digital workforce. PAFLA also proposed state funding for capacity-building programs, the creation of regional freelancing hubs, and subsidies for international professional certifications. This request comes as freelancing export receipts reached USD 959 million between July and April of FY2025–26, marking a 49% increase from the previous year. Furthermore, PAFLA warned that imposing additional taxes on knowledge-based content creators or implementing complex tax mechanisms could drive freelancers toward informal financial channels, ultimately harming Pakistan's foreign exchange position.