Pakistan's FY27 budget is likely to feature a mix of tax exemption withdrawals, tougher agricultural taxation, and higher petroleum levy collections as the government seeks to meet revenue targets agreed with the International Monetary Fund (IMF).
The country aims to raise additional revenue worth 0.6% of GDP, or about PKR 860 billion, in the FY27 budget, according to the budget preview report by brokerage Topline Securities.
How will Pakistan raise revenue in the FY27 budget?
The IMF target is split equally between the federal and provincial governments, at PKR 430 billion each. The federal share will come mainly through the FBR transformation plan and by streamlining tax exemptions.
Details of the proposed measures have yet to be officially disclosed. The budget is expected to lean on enforcement and exemption cuts rather than broad new taxes.
How much will the FBR raise through enforcement?
The FBR's measures could include raising PKR 95 billion through tax audits. Another PKR 50 billion may come from improved monitoring and better calculation of sales tax liabilities.
A further PKR 50 billion is expected from recoveries in the sugar, cement, tobacco, and fertilizer sectors. The federal contribution centers on the FBR transformation plan.
What tax exemptions will Pakistan withdraw?
The government reportedly aims to generate PKR 215 billion in FY27 by withdrawing GST and income tax exemptions. The step targets concessions that narrow the tax base.
Citing IMF estimates, Topline said Pakistan's GST efficiency ratio stands at just 22.8%. That means less than a quarter of the potential tax base is effectively taxed.
Many goods remain exempt or are taxed at concessional rates. Raising the GST efficiency ratio to 35% could generate an additional PKR 2.1 trillion, equal to 1.8% of GDP.
The IMF noted that GST exemptions amounted to 1.2% of GDP in FY25. These were concentrated on residential property sales and certain food items.
How will provinces tax agriculture?
At the provincial level, authorities are expected to broaden the general sales tax base on services. They will also increase income tax collection from the agriculture sector.
Topline highlighted a wide gap in farm taxation. Agriculture contributes 24.6% to the economy's value-added output but accounts for just 0.3% of tax revenues.
Will Pakistan raise the petroleum levy in FY27?
The government is also likely to increase the petroleum development levy (PDL) in FY27. Proceeds from the levy do not form part of FBR tax revenues.
The PDL collection target for FY26 stands at PKR 1.47 trillion. Collections reached PKR 1.33 trillion between July and April of the current fiscal year.
For FY27, the IMF has proposed raising the PDL target by 18% to PKR 1.73 trillion. The levy on petroleum products could rise to PKR 100 per liter.
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