Pakistan to unveil budget on June 10 with proposed salary hike, higher taxes for non-filers
Government proposes carbon tax, real estate withholding changes, and over PKR 6 trillion bank borrowing to address fiscal deficit
Haris Zamir
Business Editor
Experience of almost 33 years where started the journey of financial journalism from Business Recorder in 1992. From 2006 onwards attached with Television Media worked at Sun Tv, Dawn Tv, Geo Tv and Dunya Tv. During the period also worked as a stringer for Bloomberg for seven years and Dow Jones for five years. Also wrote articles for several highly acclaimed periodicals like the Newsline, Pakistan Gulf Economist and Money Matters (The News publications)
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The Pakistan government is set to present the federal budget for fiscal year 2025–26 on June 10, with proposed increases in salaries and pensions, new levies on fuel, and a significant borrowing plan to plug a growing fiscal deficit.
According to sources in the Ministry of Finance, salaries of government employees are expected to increase by 10%, while pensions are set to rise by 7.5%. Additionally, a 30% disparity allowance has been proposed for employees in grades 1 to 16, and a 15% increase for those in grades 17 to 22.
The government is also targeting undocumented sectors by proposing a withholding tax of 1.2% on cash withdrawals by non-filers, effective July 1. Once non-filers begin submitting tax returns, they will be moved to the Active Taxpayers List, sources added.
In line with its fiscal consolidation commitments, the government aims to raise the tax revenue target to PKR 14.1 trillion, slightly lower than the IMF's recommendation of PKR 14.3 trillion. The non-tax revenue is projected at PKR 5.1 trillion, up from PKR 4.854 trillion in the current fiscal year.
To enhance non-tax revenue, a carbon tax of PKR 3 to PKR 5 per liter is expected to be levied on petrol and diesel, while the petroleum development levy may be increased to PKR 100 per liter. Currently, the levy stands at PKR 78/liter on petrol and PKR 77/liter on diesel.
To bridge the fiscal deficit, the federal government is expected to borrow approximately PKR 6.4 trillion from the banking sector in FY26.
Other budget proposals under review include:
- Imposition of a 1.5% withholding tax on the value of imports.
- Rationalization of withholding tax rates on immovable properties, aimed at facilitating real estate buyers and sellers from July 1, 2025.
- Higher withholding taxes on supplies, services, and contracts.
- An increase in tax rates on profits from financial institutions, particularly national savings schemes—potentially rising 250 to 500 basis points from the current 15% for filers and 30% for non-filers.
The budget will also include tariff cuts and reductions in additional customs duties on over 7,000 products, as part of a broader effort to boost official trade and document the economy.
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