Budget 2025: Govt Announces Rs 36 Billion in Additional Taxes

In its bid to meet International Monetary Fund (IMF) conditions and reduce the fiscal deficit, Pakistan’s government has unveiled Rs 36 billion in new tax measures within the federal budget for FY 2025–26. Presented on June 10, Finance Minister Muhammad Aurangzeb emphasized the need to broaden the tax base and curb non-filers, while balancing relief for salaried taxpayers.

Jun 23, 2025 - 12:14
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Budget 2025: Govt Announces Rs 36 Billion in Additional Taxes
Budget 2025: Govt Announces Rs 36 Billion in Additional Taxes

In its bid to meet International Monetary Fund (IMF) conditions and reduce the fiscal deficit, Pakistan’s government has unveiled Rs 36 billion in new tax measures within the federal budget for FY 2025–26. Presented on June 10, Finance Minister Muhammad Aurangzeb emphasized the need to broaden the tax base and curb non-filers, while balancing relief for salaried taxpayers. These moves aim to boost revenue, support growth, and stabilize the economy.

  • Rs 36 billion in new taxes to increase revenue.

  • Goal: Raise fiscal revenue by over 14%, reduce deficit to 3.9% of GDP (from 5.9%).

  • Coverage: Taxes aimed at agriculture, real estate, retail, digital services, and fossil fuel levies.

  • Defense spending up 20%, now totaling approx. $12 billion (2.5% of GDP).

  • Introduction of higher Advance Withholding Tax (WHT) on cash withdrawals, interest income, and large transactions.

  • Tighter rules on non-filers: restrictions on purchases of cars, property, and bank accounts. 

  • New taxes on YouTubers, freelancers, and digital platforms. 

  • E-commerce and online shopping are taxed more aggressively to expand the digital tax net.

  • Higher Federal Excise Duty (FED) on chocolates, cookies, cakes, and other processed foods. Aims to raise approximately. Rs 150 billion, of which Rs 48 billion from biscuits alone.

  • Stamp duty and seller’s tax on property transactions increased; FED on solar panel imports raised. 

  • Rs 2.5 per liter carbon levy on petrol, diesel, and furnace oil (rising to Rs 5 per liter next fiscal).

  • An additional petroleum levy on fossil fuels to promote cleaner energy sources.

Tax-to-GDP ratio expected to rise from 10.3% to ~11% by June 2026. 

Total gross revenues projected at Rs 19.3 trillion; FBR collection target set at Rs 14.13 trillion. 

Measures align with the IMF-backed reform agenda under the $7 billion program.

  • Slabs revised: 5% to 1% for incomes Rs 60,000–120,000 monthly; higher brackets slightly reduced. 

  • Modest salary/pension hike of 7–10% for government staff and pensioners.

  • Every day, items like cookies, chocolates, and dairy products to getting more expensive.

  • Fuel prices are expected to increase with carbon and petroleum levies.

  • Higher seller taxes and the FED waived for property buyers. 

  • Preferential duties removed on solar panels — may slow renewable investment.

  • Regressive impact: Reliance on indirect taxes may hurt low- and middle-income consumers.

  • Tax compliance issues: FBR’s historical weakness in tracking and collecting taxes from non-filers remains a hurdle. 

  • Growth slowdown risk: Excessive indirect taxes and levies on clean energy could discourage economic activity and renewables.

Economist Hasnain Malik:

“The budget finds fiscal breathing space but could burden growth if taxes hit consumers too hard.” 

Senate Finance Committee Chair:

“Higher petroleum levies will hurt the people despite modest relief in salaried segments.”

Pakistan’s FY 2025–26 budget introduces Rs 36 billion in new taxes to meet IMF targets and reduce the fiscal deficit. Although some relief is granted to salaried taxpayers, the heavier burden on consumers, businesses, and non-filers remains a concern. The government's ability to manage revenue collection effectively and support economic growth through reform will be key to turning this ambitious plan into sustainable progress.

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