ICMA proposes tax measures to raise up to PKR 150B ahead of FY27 budget

The Institute of Cost and Management Accountants of Pakistan (ICMA) has proposed a set of tax measures aimed at generating up to PKR150 billion in additional revenue ahead of the federal budget for 2026–27.

In recommendations submitted to the Tax Policy Office at the Ministry of Finance, the institute outlined proposals targeting luxury consumption, wealth transfers and small businesses as part of efforts to broaden the tax base and improve compliance.

Excise duties on luxury, harmful goods

ICMA proposed expanding the Federal Excise Duty (FED) on a range of high-end and potentially harmful products, including a 5-7% duty on mineral oil and high-end electricity consumption, 10-15% on tobacco products, and 20-25% on alcoholic beverages.

The proposals also include a 5-10% excise on luxury vehicles at the point of registration, a 10% levy on sugar-sweetened beverages, and a 15% duty on e-cigarettes and e-liquids.

The institute estimates these measures could generate between PKR 120 billion and PKR 150 billion, with tobacco contributing PKR40-50 billion, luxury vehicles PKR25-30 billion, high-end energy consumption PKR30-40 billion, and sugary drinks PKR15-20 billion.

The measures are designed to target higher-income consumers while discouraging harmful consumption and strengthening tax administration.

Tax on wealth transfers

ICMA also proposed introducing a Capital Acquisitions Tax on high-value gifts and inheritances.

The tax would apply where either the donor or recipient is a Pakistani tax resident or where the asset is located in Pakistan. Suggested exemptions include PKR 50 million for direct heirs such as spouses and children, PKR 10 million for close relatives, and PKR 5 million for others, with progressive rates applied above those thresholds.

Simplified tax regime for small businesses

To expand documentation, the institute recommended a simplified tax regime for micro-entrepreneurs with annual turnover of up to PKR 5 million.

Under the proposal, small business owners would pay a fixed monthly tax of PKR 2,000 covering income tax and minimum social security contributions. In return, compliant taxpayers would gain access to health insurance and pension benefits, with simplified digital registration and quarterly filing requirements.

ICMA also proposed a Global Export Incentive Scheme offering reduced corporate tax rates of 5-10% for commodity traders, brokers and supply-chain firms that establish operations in Pakistan and meet local employment thresholds.

The proposals, prepared by ICMA’s Research and Publications Department, are part of broader recommendations aimed at documenting the economy, tapping new revenue streams and ensuring sustainable fiscal growth.