The Finance Bill for 2025–26 is expected to introduce stringent new measures targeting non-filers, with significant changes to the withholding tax regime aimed at increasing revenue collection.
In a bid to further differentiate between compliant and non-compliant taxpayers, the government plans to widen the gap in withholding tax rates between filers and non-filers.
According to Business Recorder citing official sources, the Federal Board of Revenue (FBR) has proposed a series of adjustments, including raising the withholding tax on cash withdrawals by non-filers from the current 0.6 percent to a range between 1 and 1.2 percent. This is part of a broader strategy to penalize non-compliance and encourage documentation of the economy.
Withholding taxes—largely collected through mechanisms similar to sales tax—continue to constitute more than 70 percent of Pakistan’s direct tax revenues. This reliance is expected to persist in the upcoming fiscal year, with new proposals under review, including a hike in the tax rate on interest income.
Moreover, a 1.5 percent withholding tax on the value of imported goods is being considered, alongside adjustments to existing rates on supplies, services, and contractual payments. The withholding tax regime for transactions involving immovable property is also expected to be rationalized from July 1, 2025, to ease the tax burden on the real estate sector’s participants.
On the indirect tax front, the government is likely to impose an 18 percent sales tax on the import of solar panels—previously exempt—and extend the same rate to e-commerce transactions. A broader increase in sales tax is also on the table, potentially affecting numerous goods currently enjoying reduced or concessionary rates.
