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Govt, IMF Agree on Hike in Petroleum Levy, Tax Reforms
Govt, IMF Agree on Hike in Petroleum Levy, Tax Reforms Govt, IMF agree on increasing carbon levy by Rs 5 & hiking petroleum levy beyond Rs 100/liter. Tax exemptions for FATA/PATA & fertilizer may end. Major reforms ahead.
ND
by News Desk
2025-05-20
Govt, IMF Agree on Hike in Petroleum Levy, Tax Reforms

Pakistan and the International Monetary Fund (IMF) have reached an understanding on key fiscal adjustments, including a significant hike in levies on petroleum products and sweeping tax reforms, according to reliable government sources.

As part of ongoing negotiations, both sides have agreed to impose a carbon levy of Rs 5 per liter on petroleum products. Furthermore, there is a proposal under consideration to increase the petroleum development levy (PDL) to over Rs 100 per liter in the upcoming fiscal year — a move aimed at enhancing revenue collection.

The IMF has also pushed for broader tax reforms in other sectors. Among the key proposals is the abolition of tax exemptions previously granted to the former FATA and PATA regions, bringing them in line with the national tax structure. Additionally, the Fund has recommended applying the standard general sales tax (GST) rate on fertilizers, which are currently subject to concessional tax treatment.

In another policy shift, duties on used vehicles are set to rise. The government plans to maintain an overall duty rate 40% higher for used vehicles compared to new ones, gradually reducing this differential by 10% each year, with a complete phase-out by 2030.

These measures are part of Pakistan's broader commitment to fiscal consolidation and structural reforms under its arrangement with the IMF. While the government faces mounting pressure to manage rising inflation and energy prices, officials argue these steps are necessary to stabilize the economy and meet revenue targets.

The final decisions on these proposals will be included in the 2025-26 federal budget, expected to be presented next month.

 
Tagged:

IMFDeal

PetroleumLevy

Budget2025

CarbonTax
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