ISLAMABAD: The Government of Pakistan is introducing aggressive tax reforms in Budget 2025–26, with a sharp focus on cracking down on non-filers and tax evaders.
Sources indicate that the Federal Board of Revenue (FBR) is leading the charge by proposing stringent penalties and restrictions aimed at enhancing compliance and expanding the tax base.
Fines for tax fraud conducted outside the Point of Sale (POS) system are set to rise dramatically—from PKR 500,000 to PKR 5 million.
This tenfold increase signals the government’s resolve to penalize hidden businesses and undocumented transactions.
Entities operating without transparent systems will also face tough legal consequences.
Severe Restrictions on Non-Filers
To further curb tax evasion, the budget outlines heavy restrictions on non-filers.
These individuals will be banned from purchasing vehicles or real estate.
They will also face limitations on investing in mutual funds or stock markets, and conducting large financial transactions will be off-limits.
While earlier plans considered blocking SIM cards and internet devices, this restriction has reportedly been dropped.
However, non-filers will be prohibited from international travel, except for religious pilgrimages.
Additionally, the withholding tax on cash withdrawals exceeding PKR 50,000 will double—from 0.6% to 1.2%—to discourage undocumented cash flow.
Broader Tax Reforms Under IMF Pressure
In line with IMF recommendations, the government is planning to expand the tax net even further.
Proposals include the introduction of an agricultural income tax and new levies on digital and foreign earnings, especially from freelancing.
Capital Gains Tax (CGT) on property and shares may also rise.
Other suggested changes include new taxes on fertilisers, insecticides, and sweets, while taxes on beverages and cigarettes could be reduced.
Despite these hard measures, the budget includes relief for salaried individuals.
Government employees are expected to receive a 10% salary raise, while retired civil servants may get a pension increase of 5% to 7.5%.
Grades 1 to 16 staff will also benefit from a 30% special allowance merged into their basic pay.
