Pakistan and the International Monetary Fund (IMF) are trying to enforce more tax measures to raise an extra Rs. 700 billion in the 2025–26 budget to meet a revenue target of Rs. 14.307 trillion.
The government has proposed tax adjustments for salaried individuals, tobacco, and beverages. The IMF has so far objected to reduced tax rates for middle-income earners (Rs. 0.2–0.4 million per month).
In the tobacco sector, the government is likely to raise the Minimum Legal Price (MLP) per cigarette pack, currently Rs. 162.25, without altering the existing two-tier federal excise duty structure. Over 80 percent of brands are sold below or slightly above the MLP.
For enforcement, enhanced monitoring of advance tax payments at Green Leaf Threshing (GLT) facilities for unprocessed tobacco is being considered.
In the beverages sector, the Federal Board of Revenue (FBR) is resisting tax rate cuts due to the risk of generating refunds, which it seeks to avoid. The IMF raised concerns about how such refunds would be handled.
The Finance Ministry estimates FBR’s baseline revenue at Rs. 13,556 billion for FY26. The IMF projects only Rs. 13,200 billion. If this is correct, the Revenue Division will incur a Rs. 300 billion shortfall.
If the Rs. 14,307 billion target is accepted, the government will need to bridge the gap with Rs. 700 billion in new taxes and enforcement.
The Annual Plan Coordination Committee (APCC) will meet on May 26 to finalize macroeconomic and development frameworks for the upcoming budget.
