IMF seeks higher taxes on solar panels, EVs in FY2027 budget

According to the Finance Ministry sources, the IMF mission concluded budget talks with Pakistani authorities and returned to Washington after discussions on tax reforms, fiscal targets and revenue measures.

Sources said Pakistan and the IMF agreed in principle on tax measures worth Rs1,100 billion at both the federal and provincial levels for the next fiscal year.

The federal government has assured the IMF that it will introduce 230 new taxes worth Rs370 billion in the upcoming budget, while provinces have committed to additional tax measures worth Rs430 billion.

The IMF has reportedly demanded that the sales tax on solar panels be increased from 10 percent to 18 percent from July 1.

Similarly, it has also proposed raising the sales tax on electric vehicles (EVs) from one percent to 18 percent.

The Federal Board of Revenue (FBR) has been assigned a tax collection target of Rs15.264 trillion for the next fiscal year.

For the first half ending December 2026, the FBR’s revenue target has been set at Rs7.022 trillion.

The government is also planning to generate an additional Rs95 billion through tax audits during the next fiscal year.

Officials estimate that another Rs50 billion could be recovered from the sugar, cement, tobacco and fertilizer sectors.

Sources said the IMF has retained its condition requiring biannual reviews of gas and electricity tariffs.

The lender has also recommended against granting new tax exemptions for Special Economic Zones and sought the gradual withdrawal of incentives for those zones by 2035.

The IMF has further demanded an 18 percent increase in the petroleum levy target for the next fiscal year, seeking an additional Rs262 billion in revenue, sources added.

IMF statement

In a statement issued after the talks, the IMF said “constructive discussions” were held with Pakistani authorities on economic developments, including the impact of the Middle East conflict, preparations for the upcoming budget and progress under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF).

“The authorities reaffirmed their commitment to a primary surplus target of two percent of gross domestic product (GDP) in FY2027, which will support fiscal sustainability and continue to build resilience,” the IMF said.

The statement added that fiscal consolidation efforts would focus on broadening the tax base, improving tax administration, enhancing spending efficiency and strengthening public financial management at both federal and provincial levels.