FBR unveils Rs36 billion in new taxes to offset revenue loss from solar panel tax cut, salary hike

The Federal Board of Revenue (FBR) unveiled new taxation measures totalling Rs 36 billion to address a financial shortfall resulting from the reduction in sales tax on solar panels from 18% to 10% and proposed a salary hike for government employees from 6% to 10%, according to a news report. 

These measures, introduced during a session of the National Assembly Standing Committee on Finance on Sunday, are part of efforts to fill the budget gap for the fiscal year 2025-26.

The NA committee approved the following new measures:

1. A 10% Federal Excise Duty on day-old chicks (DOC) in the poultry sector which will further increase the prices of chicken in the country.
2. An increase in the tax rate from 25% to 29% on dividends received by companies from mutual funds deriving income from debt profits.
3. A rise in the withholding tax from 15% to 20% on profits from government securities paid to institutional investors, excluding individuals.

The FBR Chairman, Rashid Mahmood Langrial, explained that these additional taxes would help mitigate the Rs 35-36 billion gap, which includes Rs 12 billion from salary increases and Rs 8.5 billion from the reduction in sales tax on solar panels.

These measures will be incorporated into amendments to the Finance Bill for 2025-26.

The FBR also disclosed that the total new taxes introduced in the budget amount to Rs 312 billion, alongside enforcement measures of Rs 389 billion for the upcoming fiscal year. After accounting for the impact of the solar panel tax reduction, the net revenue effect of these measures is expected to reach Rs 339.5 billion.

In addition to these steps, the Finance Committee was informed that a uniform 10% tax rate would be applied to both imported and local cotton.

The government has also shared six new tax measures with the International Monetary Fund (IMF), of which three have already been approved.