Islamabad has successfully obtained the International Monetary Fund’s approval to abandon the planned tax increase on solar panels and stationery products, following direct intervention by Prime Minister Shehbaz Sharif. This development comes as the government prepares its federal budget for the fiscal year 2026-27.
This move is seen as a major win for the government, which has faced considerable pressure to protect citizens from escalating inflation while managing the strict conditions attached to the IMF bailout program. The IMF has formally retracted its proposal to raise the sales tax on solar panels from 10 percent to 18 percent. Similarly, the proposed tax hike on stationery items has also been removed from the upcoming budget.
Additionally, the tax framework governing the country’s stock market will remain unchanged starting July 1, 2026. Despite these resolutions, discussions between Pakistani officials and the IMF continue concerning proposed tax reliefs for the real estate sector.
In a significant development, the government is contemplating increasing the income threshold for the highest tax bracket applicable to salaried individuals. Furthermore, the possibility of abolishing an additional surcharge or penalty currently imposed on high-income earners is under review.
Exporters are also poised to benefit from potential tax relief measures. Tax authorities are considering eliminating a 1 percent export tax as part of a new support package. This follows the Finance Act 2024, which transitioned exporters from the Final Tax Regime (FTR) to the Normal Tax Regime (NTR), replacing a flat 1 percent turnover tax with a minimum 2 percent tax on export income, consisting of a 1 percent minimum tax and a 1 percent advance tax.
Industrial and export groups have urged the government to implement reforms that would bolster exporters and sustain their competitiveness. Their key demands include reinstating the Final Tax Regime on an optional basis with a 1 percent turnover tax, ensuring timely sales tax refunds to alleviate liquidity challenges, and providing targeted tax relief for exporters experiencing financial losses. They have also called for establishing a special committee to shield businesses under the Normal Tax Regime from excessive audits and enforcement actions by the Federal Board of Revenue.
The federal budget for the fiscal year 2026-27 is scheduled to be presented in parliament on June 12, where the finalized IMF-supported measures will be officially announced.
