Govt Likely to Double Tax on Fertilizers and Impose Duty on Pesticides in FY26 Budget

The federal government wants to increase the federal excise duty on fertilizers to 10 percent and impose a new 5-10 percent duty on pesticides in the FY2025-26 budget to squeeze out Rs. 50 billion in additional taxes. This would help meet the new Rs. 14.3 trillion tax target next fiscal year. The agriculture sector will also face new income tax rates of up to 45 percent from July on income earned since January, reported Express Tribune. These taxes were agreed under Pakistan’s latest International Monetary Fund (IMF) program which requires higher taxation on agricultural inputs and removal of price interventions. The IMF views low or no FED on fertilizer and pesticides as harmful. The government has committed not to reverse these tax increases despite facing opposition from rival political parties. A reduction in the super tax rate from 10 percent to 8 percent is also under review. This will proceed only if alternative revenue sources are secured. The super tax is applied to high-income individuals and corporations mostly. The budget may also limit the tax-free status of Special Economic Zones (SEZs) from 10 to 9 years starting from July. No new SEZ tax incentives will be granted or renewed. Talks with the IMF begin May 14 to finalise tax measures for meeting the Rs. 14.3 trillion revenue target, which is 16 percent higher than this year’s revised goal.