ISLAMABAD: The National Assembly Standing Committee on Finance has presented its amended report on the Finance Bill 2026 to the lower house, recommending approval of the legislation with several key changes aimed at expanding the tax base, tightening enforcement, and accelerating digital transformation of Pakistan’s tax system.
The recommendations cover a broad set of fiscal measures, including new taxes on digital income, revisions in customs duties, incentives for exporters and select industries, and stricter compliance mechanisms. Lawmakers say the proposed changes are intended to improve revenue collection while modernising tax administration and reducing opportunities for evasion.
Tax on digital earnings and online platforms proposed
Among the most significant proposals is a 5% withholding tax on income earned through social media platforms. The committee has also recommended that foreign currency earnings from platforms such as YouTube, when transferred to Pakistan through banking channels, should be subject to withholding tax.
These measures reflect the government’s attempt to formalise income streams from the growing digital economy and bring online earnings into the tax net.
Retail, export, and financial sector adjustments
The committee has also proposed a 5% withholding tax on unregistered shopkeepers, while recommending the withdrawal of a 1% advance tax previously applicable to exporters.
In a separate recommendation, exporters generating at least 80% of total business from exports may be exempted from certain tax obligations. Additionally, businesses with annual turnover up to Rs200 million may be allowed to opt out of the final tax regime.
Private equity and venture capital funds may also benefit from relaxed tax exemption conditions under the proposed framework.
Customs, automotive, and industry-specific changes
The report recommends tax exemptions on aircraft parts for PIA and registered airlines, as well as relief on the import of machinery for commercial ships and tankers.
For the automotive sector, major changes have been suggested, including revised Federal Excise Duty on electric vehicles and zero duty on imported EVs valued up to $75,000. However, higher duties have been proposed for luxury vehicles, including 86% for 2000–3000cc cars and 92% for vehicles above 3000cc.
A new token tax structure for vehicles in Islamabad has also been suggested, with annual tax of Rs20,000 for vehicles up to 1000cc and value-linked taxation for larger engines.
Push for digital tax enforcement
A major focus of the bill is the digitisation of Pakistan’s tax system. The committee has recommended expanding electronic invoicing across sectors, strengthening production monitoring systems, and enabling the Federal Board of Revenue (FBR) to resolve cases using algorithm-based systems.
Proposals also include:
- Establishment of a central virtual data repository for banking information under the State Bank of Pakistan
- Legal backing for faceless audits and e-hearings
- Expansion of e-auction systems for confiscated goods
- Stricter penalties for fake invoices, including fines equal to invoice value
- Up to five years imprisonment for tampering with customs warehouses
Large retailers with turnover above Rs2 billion may face expanded monitoring requirements, while non-compliant or unregistered businesses could face penalties of up to Rs5 million.
Committee approves bill with amendments
The Finance Committee has formally recommended approval of the Finance Bill 2026 with the proposed amendments, sending it to the National Assembly for further consideration.
Officials say the revised framework is designed to balance revenue generation with targeted relief measures for key sectors while pushing the tax system toward greater digitisation and transparency.
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