Pakistan budget 2026-27 targets retailers, digital income and imports with new taxes

Pakistan's government has announced a range of new tax measures targeting retailers, digital earners and importers as part of the federal budget for fiscal year 2026-27, presented Thursday.

The measures aim to widen the tax base, curb misuse of exemptions and improve compliance across key sectors of the economy.

What does Pakistan's 2026-27 budget mean for retailers and small businesses?

The budget introduces a Fixed Tax "Asaan Scheme" for retailers with annual sales of up to PKR 200 million. Eligible retailers will pay either a minimum annual tax of PKR 25,000 or 1% of sales, whichever is higher.

The scheme is designed to bring a large segment of small traders into the formal tax net without mandatory audits.

How will the budget tax digital income from YouTube, TikTok and Instagram?

Authorities have announced a withholding tax on income earned through social media platforms, including YouTube, Instagram and TikTok. Banks will be authorized to deduct the tax at source, making collection largely automatic for digital earners.

The measure is part of a broader push to extend taxation to the digital economy.

The government also linked penalties for non-compliance with digital integration requirements to inflation. Officials said the step is intended to strengthen enforcement and improve documentation of the economy over time.

What new taxes apply to vehicle and luxury imports?

The budget imposes Federal Excise Duty on vehicles with engine capacities above 2,000cc and on electric vehicles valued above PKR 20 million. The measures tighten taxation on high-end automobile imports, which officials have identified as a target for revenue generation. No relief was announced for standard passenger vehicle categories.

To address misuse in the energy sector, authorities imposed a Federal Excise Duty of PKR 80 per liter on white spirit and naphtha. Officials said these products are often blended with petroleum fuels, making the levy a compliance measure as much as a revenue one.

Which sectors received tax relief in the federal budget?

The pharmaceutical sector will benefit from the removal of import duties on active pharmaceutical ingredients used in medicines for chronic diseases, including cancer.

The government also revised taxation on digital nicotine products, increasing the FED on e-liquids to PKR 16,500 per kilogram from PKR 10,000 per kilogram while removing a previous tariff of up to 65% of the retail price.

A tax has also been proposed on sham life insurance policies, with officials saying the measure is meant to discourage the use of insurance structures for tax arbitrage.

The minimum tax rate for distributors and wholesalers has been raised from 0.25% to 0.5% as part of broader revenue collection efforts.