| Islamabad: Amid a downward revision in Pakistan’s annual tax collection target, the Federal Board of Revenue (FBR) has proposed tax rate reductions for key sectors, including real estate, tobacco, and beverages, in an effort to boost economic activity and increase revenue. The proposal has been shared with the International Monetary Fund (IMF) for approval.
According to sources, FBR projects that a reduction in tax rates could help revive transaction volumes in these sectors, which have declined sharply under the current taxation regime. The tax authority estimates that these adjustments could generate an additional Rs100 billion in revenue during the April-June period of the ongoing fiscal year.
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For the real estate sector, FBR has suggested lowering withholding tax rates on property transactions under Sections 236C and 236K of the Income Tax Ordinance. The move aims to curb off-the-record deals and increase formal transactions, potentially adding Rs20 billion to tax revenues.
Similarly, FBR has proposed a 25% reduction in the Federal Excise Duty (FED) on cigarettes, arguing that the current high tax rates have driven consumers toward untaxed products, reducing overall collections. The industry’s projections indicate that a tax cut could bring in an additional Rs44 billion by the end of June.
The tax authority has also recommended lowering FED rates for the beverages sector, citing a significant drop in tax-paying volumes.
While the Pakistani authorities have informed the IMF about these proposals, it remains unclear whether the adjustments will take effect within the current fiscal year or be incorporated into the 2025-26 budget.
Read: Govt likely to abolish FED on property transfers to boost real estate
The IMF, which has assessed FBR’s revenue collection potential at Rs12,480 billion for the current fiscal year—falling short of the Rs12,970 billion target—will review the proposals as part of ongoing discussions.
If approved, these tax adjustments could provide temporary relief to businesses while helping Pakistan bridge its revenue shortfall. |
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