Proposed tax reforms and new levies under discussion ahead of FY 2026–27 budget

ISLAMABAD — Negotiations between Pakistan and the International Monetary Fund (IMF) over the federal budget for fiscal year 2026–27 have entered a final stage, with discussions centring on tax reforms, revenue targets and new fiscal measures, according to official sources.

The IMF has reportedly urged Pakistan to increase the General Sales Tax (GST) rate from 18% to 19% as part of broader efforts to strengthen revenue collection.

Budget size and revenue targets revised

Sources familiar with the discussions say the proposed federal budget size is being considered for an increase from Rs15.1 trillion to Rs15.5 trillion.

At the same time, the tax collection target for the current fiscal year has reportedly been revised downward to Rs13.5 trillion due to a shortfall in revenue performance.

Despite this, the IMF is said to be pushing for a significantly higher tax target exceeding Rs15 trillion for the upcoming fiscal year.

New taxes worth Rs220 billion under consideration

Officials are also weighing proposals for fresh tax measures amounting to approximately Rs220 billion.

Among the suggested reforms is the introduction of a fixed tax scheme for traders, aimed at broadening the tax base and simplifying compliance.

Under the proposed structure, traders with annual sales of up to Rs200 million would pay a fixed tax of Rs25,000, while those opting for the scheme would be exempted from audits.

Focus on widening tax net

Economic observers say the proposed measures reflect continued pressure on Pakistan to expand its tax base and reduce fiscal deficits under IMF-backed reforms.

The discussions highlight the ongoing challenge of balancing revenue generation with economic growth and business community concerns.

Finalisation expected soon

Officials indicate that negotiations are nearing completion, with key policy decisions expected to be finalised ahead of the formal presentation of the federal budget.

The outcome of the talks is likely to shape Pakistan’s fiscal strategy for the coming year, particularly in terms of taxation and public expenditure priorities.