Government Financial Regulation Proposal Unveils Significant Amendments
BUMPING UP THE MONEY: A NEW TWIST IN PAKISTAN'S TAX REGIME WITH FINANCE BILL 2025-26
Get ready for some major changes in the tax realm next fiscal year, folks! In an attempt to beef up the government's coffers, the Finance Bill 2025-26 plans to whack the withholding tax game with a flurry of modifications.
According to insiders, the gap between filers and non-filers will widen further, with the higher-ups pondering over hiking the withholding taxes for the latter. This reliance on withholding taxes ain't nowhere near slowing down either. Run-of-the-mill withholding taxes (collected in sales tax mode) contribute a whopping 70% to the total direct taxes collection.
Here's the lowdown on some of the proposals under the spotlight:
- Clamping down on dips in the banking world: The Federal Board of Revenue (FBR) is tossing around the idea of boosting the withholding tax on cash withdrawals from banks by non-filers. From next year, they'd be coughing up 1% to 1.2% on any withdrawals exceeding 50,000 rupees in a single day, whether they use an ATM or credit cards.
- Nofun for non-filers: Starting July 1st, 2025, non-filers may well find themselves on Santa's naughty list, banned from engaging in certain financial transactions. Ouch!
- Squeezing imports: The FBR is contemplating the imposition of a 1.5% withholding tax on the value of imports.
- Real estate revolution: Rates of Withholding Tax on immovable properties are set to undergo a revamp in the Finance Bill 2025-26, with expectations of rationalizations aimed at making it a breeze for both buyers and sellers of real estate from July 1, 2025.
- Contract Creep: The FBR is also mulling over a bump in withholding tax on supplies, services, and contracts.
These tweaks aim to boost tax compliance and fuel the revenue engine, all the while discouraging non-filing and encouraging more folks to file their returns. Filers may sneak out of this kerfuffle scot-free, but broader tax reforms could indirectly influence them by shaping the wider tax environment.
Sources:
[1] "Exclusive: Full details of proposals for Finance Bill 2021-22" - Business Recorder, 2025[2] "Proposed changes in income tax rate" - The Express Tribune[3] "FBR's plans to tackle tax evasion" - Dawn, 2025[4] "Withholding tax on credit card payments" - ProPakistani, 2025[5] "ATM withdrawal tax clarified" - Samaa TV, 2025
- The Finance Bill 2025-26 proposes to increase the withholding tax on cash withdrawals from banks by non-filers, aiming to incentivize tax filing and increase government revenue.
- In personal-finance matters, non-filers might soon face restrictions on certain financial transactions starting from July 1, 2025.
- Businesses and importers should prepare for a potential 1.5% withholding tax on the value of imports, as the government seeks to generate more revenue and promote tax compliance.
