The federal government has proposed significant reductions in duties on vehicles, auto parts, and industrial raw materials as part of the fiscal year 2025-26 budget, according to official sources. The proposals were discussed in a key meeting with the International Monetary Fund (IMF).

Among the measures under consideration is the removal of the existing 2 percent additional customs duty on auto spare parts, along with a gradual reduction in customs duty slabs currently ranging from 4 to 7 percent. Authorities are also eyeing a 20 percent cut in customs duties on vehicles, which currently stand between 15 and 90 percent.

To boost exports by up to $5 billion, the government is mulling tax cuts on raw materials used in various industries, including textiles, chemicals, plastics, auto parts, iron, and steel. Plans are also underway to reduce duties on semi-finished goods and industrial raw materials to support industrial growth.

In the real estate sector, a 0.5 percent reduction in withholding tax on property transactions is being considered.

The proposed tax revenue target for the Federal Board of Revenue (FBR) for the next fiscal year is set at Rs. 14,305 billion. Of this, Rs. 600 billion is expected to come from improved enforcement of existing tax laws, while Rs. 400 billion is projected from new policy measures.

Additionally, the government plans to begin tax collection on agricultural income starting July 1, 2025.

Meanwhile, the IMF continues to press Pakistan to broaden its tax base and bring more of the economy into the formal sector.