FBR unveils Rs36 billion new tax measures to offset solar tax cut and salary hikes

By Staff Reporter

ISLAMABAD: The Federal Board of Revenue (FBR) has rolled out a Rs36 billion package of new taxes to plug a financial gap triggered by a reduction in sales tax on solar panels and a proposed salary hike for government employees.

Addressing the National Assembly Standing Committee on Finance on Sunday, chairman FBR Rashid Mahmood Langrial detailed three measures approved by the committee: a 10% Federal Excise Duty on day-old chicks in the poultry sector, an increase in the tax rate on dividends from mutual funds deriving income from profit on debt to 29% from 25%, and a hike in withholding tax on profits from government securities to 20% from 15% for institutional investors.

These steps will be folded into amendments to the Finance Bill for 2025-26, part of a broader effort to shore up revenues for the next fiscal year.

In the 2025-26 budget, the FBR had already lined up Rs312 billion in new taxation measures and Rs389 billion from enforcement actions. But a decision to cut the sales tax on solar panels from 18% to 10% shaved Rs 8.5 billion off expected revenues, leaving a net gain of Rs339.5 billion.

The Finance Committee also gave its nod to the Finance Bill, weaving in recommendations from both the Senate committee and its own members.

Separately, the committee learned that a uniform 10% tax rate will now apply to both imported and local raw cotton, leveling the playing field for the two.

Langrial underscored that the new taxes aim to close a Rs35-36 billion shortfall. This includes Rs12 billion tied to salary increases for government workers and Rs8.5 billion from the solar tax reduction, alongside additional funds set aside for provincial revenue distribution under the National Finance Commission (NFC) Award.

He added that the government has pitched six new taxation measures to the International Monetary Fund (IMF), with three getting the green light.

Finance Minister Muhammad Aurangzeb rolled out a Rs17.573 trillion budget for the fiscal year 2026 on June 10. The budget slashed spending by 6.9% and targeted a hefty Rs14,131 billion tax take, up 8.95%, under the watchful eye of the International Monetary Fund (IMF). The budget ramps up taxes, boosts development spending, and offers targeted relief, aiming for 4.2% GDP growth and a 7.5% inflation rate.