The federal government is preparing to cast a wider net in its tax policy by including freelancers, vloggers, and YouTubers in the upcoming Budget 2025-26. This move is part of a broader plan to generate additional revenue of Rs. 500 to Rs600 billion, according to a recent research report by Topline Research.
In its report, Pakistan Federal Budget FY26 Preview, Topline Research anticipates that the Federal Board of Revenue (FBR) will be assigned a revenue collection target of Rs. 14.1 to Rs. 14.3 trillion, reflecting a 16 to 18 percent year-on-year increase. The bulk of this growth—around 12 percent—is expected from economic momentum driven by a GDP growth of 3.6 percent and inflation of 7.7 percent. The remaining increase, amounting to Rs. 500-600 billion, is expected to come from new tax measures.
One of the key proposals includes a 3.5 percent tax on income earned through digital platforms such as YouTube, TikTok, and Instagram. This idea was originally proposed by the Institute of Cost and Management Accountants of Pakistan (ICMAP), which estimates that taxing social media income could yield up to Rs. 52.5 billion annually.
Tax on Pensions, Retail Sector, and GST Adjustments
The government is also considering a tax of 2.5 to 5 percent on monthly pensions exceeding Rs400,000. While a similar measure was considered in previous years, it is now seen as more likely to be implemented in FY26, with expected revenue generation of Rs. 20 to Rs. 40 billion.
Another significant adjustment involves the method of calculating general sales tax (GST) on key commodities. For example, GST on sugar is now being calculated based on a base price of Rs. 72.22 per kilogram, despite market prices having surged to Rs. 150. This change alone could add Rs. 70 to Rs. 80 billion to the national exchequer annually.
Health Tax and Excise Duty Hikes
The government is also weighing a “health tax” on ultra-processed food items such as biscuits and packaged snacks. The initial plan includes increasing the federal excise duty (FED) on these items by 20 percent, with a longer-term goal of reaching 50 percent by FY29. Additionally, FED on cigarettes is likely to be increased as part of the same initiative.
IMF Conditions and Structural Reforms
To meet its commitments to the International Monetary Fund (IMF), the government has proposed eliminating the “non-filer” category through the introduction of Section 114C. This law, currently under review by the Senate, would prohibit non-filers from purchasing high-value assets like vehicles and real estate. While some technical updates to FBR systems are still required, the clause is expected to be included in the upcoming finance bill, with possible concessions in its initial phase.
The petroleum sector will also see changes. The government plans to increase the petroleum development levy (PDL) by Rs. 5 per liter on petrol and diesel in the form of a carbon tax, with an additional levy being considered for furnace oil. These measures could generate Rs. 35 to Rs. 80 billion, assuming PDL is applied within the range of Rs. 40 to Rs. 78 per liter.
Another major IMF requirement is for Pakistan to collect at least Rs. 295 billion from the retail sector by December 2025. To meet this goal, the government may increase advance taxes on distributors and retailers.
What else is on the table?
Here are some of the other tax and policy changes expected in Budget 2025-26:
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A 5 percent increase in FED on fertilizers and pesticides, likely to generate over Rs. 30 billion
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Removal of GST concessions and exemptions, especially in the FATA/PATA regions
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Implementation of agricultural income tax at the provincial level
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Higher GST rates on luxury goods such as cosmetics, jewelry, aircraft, ships, and high-end smartphones
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Possible tax relief for salaried individuals and the real estate sector
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Reduction in import duties on vehicles and an increase in the age limit for used car imports from 3 to 5 years
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Introduction of housing finance subsidies to stimulate the construction sector
As the national budget is set to be unveiled on June 2, 2025, all eyes are on how these reforms will impact citizens, digital professionals, and key industries. While the government’s measures aim to boost revenue and fulfill IMF conditions, their real-world impact will be closely watched in the months to come.
