Pakistan to Ask IMF to Reduce Super Tax on Industries in FY26 Budget

Pakistan has decided to engage the International Monetary Fund (IMF) in talks to reduce the super tax imposed on major industries as continued high taxation could drive investment out of the country. According to sources in the Federal Board of Revenue (FBR), the decision to approach the IMF comes from concerns that the current tax burden may be discouraging industrial growth and deterring foreign and domestic investors. FBR plans to negotiate relief in the super tax structure during the upcoming discussions with IMF. Currently, a 10 percent super tax is levied on large-scale industries, including cement, steel, sugar, oil and gas, and LNG terminals. This additional levy raises the effective tax rate on these sectors to 39 percent. The super tax was originally introduced in 2022 as a measure to shield the general population from further taxation by targeting high-earning sectors. FBR officials revealed that legal challenges involving approximately Rs. 200 billion in super tax assessments are currently pending in various courts, adding further complexity to the issue. Despite the concerns from industry, the government has made notable progress in increasing the tax-to-GDP ratio, which has risen from 8.8 percent to 10.4 percent. The aim is to push this figure to 10.6 percent by June and then to 11 percent next fiscal year.