Pakistan is in final-stage negotiations with the International Monetary Fund (IMF) over the Federal Budget 2026-27, as authorities try to balance tax relief measures with strict revenue-raising demands that could impact millions of citizens and businesses.

The government is proposing relief for salaried individuals, including lower income tax rates for middle-income groups and a possible reduction in the Super Tax from 10 percent to 8 percent for selected high-earning companies. Officials are also pushing to remove the one percent advance income tax on exporters to improve competitiveness in global markets.

Another major proposal under discussion is tax relief for the property sector, including the possible elimination of taxes on property transactions for filers. However, the IMF has opposed full exemptions and instead suggested a reduced transaction tax of 0.5 to 1 percent to maintain documentation and transparency.

At the same time, the IMF is urging Pakistan to expand its tax base by withdrawing reduced GST rates and exemptions across multiple sectors. These include solar panels, electric and hybrid vehicles, tractors, fertilizers, pharmaceuticals, food products, and industrial imports, many of which currently enjoy concessional tax rates.

A key point of contention is the proposed increase in GST on solar panels from 10 percent to 18 percent, which could raise costs for renewable energy consumers and investors.

The Federal Board of Revenue faces a challenging revenue target of over 15 trillion rupees for 2026-27, requiring a significant increase in collections compared to current levels. Officials acknowledge the gap may exceed 2 trillion rupees depending on final estimates.

The final budget is expected to reflect a compromise between economic relief measures and IMF-backed fiscal tightening.