[Karachi – 13th June 2025]- ICMA Pakistan has welcomed the Government’s incorporation of several of its key recommendations in the Federal Budget 2025–26, reflecting a constructive step toward a more balanced, inclusive, and forward-looking tax system. These proposals — aimed at broadening the tax base, reducing the burden on salaried individuals, and tapping into emerging economic sectors — were developed by the Institute’s Research and Publications Department and submitted to the Federal Board of Revenue (FBR) by the official deadline of January 31, 2025.
A number of these ICMA proposals have been adopted in the budgetary measures announced by Finance Minister Mr. Muhammad Aurangzeb in his budget speech on June 10, 2025. Among them is the introduction of a withholding tax on high-value pensions, in line with ICMA’s proposal to tax affluent pensioners while protecting low- and middle-income retirees. This measure promotes fairness without compromising social protection.
ICMA’s recommendation for a phased taxation regime to support the electric vehicle (EV) industry has been addressed through a levy on internal combustion engine vehicles, encouraging a gradual shift to cleaner technologies without imposing high initial tax burdens on the nascent EV sector.
In the area of digital commerce, ICMA’s proposal to tax cross-border online transactions has been reflected in the imposition of tax under Section 6A of the Finance Bill on digitally ordered goods and services. The new framework ensures that offshore sellers participate fairly in the domestic tax system. In addition, the recommendation to tax foreign digital advertisements has been adopted through a 5% tax on payments made to social media platforms targeting Pakistani users.
The growing market of paid digital subscriptions — such as streaming services — has also come under the tax net in line with ICMA’s suggestions. The withholding tax rate on specified services has been increased, while ICMA’s call for exemptions for low-income users and minors was also put forward as a consideration to ensure equitable treatment.
To support sustainable development, ICMA’s recommendation for incentivizing renewable energy investments has been addressed through the continuation of zero customs duty on items used in solar power and other clean energy technologies. Although a direct tax rebate was not introduced, the exemption supports investment in green infrastructure.
In the real estate sector, ICMA’s proposal to tax high-value properties has been partially implemented by increasing advance tax rates on large transactions. While a comprehensive real estate wealth tax has not yet been introduced, the budgetary changes reflect a move toward greater equity in asset taxation.
Through these measures, the Government has demonstrated its willingness to adopt innovative and underutilized revenue streams — a core theme of ICMA’s proposals. The Institute views this as a positive shift away from over-reliance on the salaried class, which continues to contribute the highest share of direct taxes in Pakistan.
ICMA remains committed to supporting the Government through evidence-based policy recommendations and will continue to play its part in advancing tax reforms that strengthen Pakistan’s fiscal foundations while promoting equity, innovation, and sustainability.
