Islamabad: Pakistan and the International Monetary Fund (IMF) are considering potential tax increases on rooftop solar panels and internet services as part of contingency measures to address possible revenue shortfalls during the current fiscal year.
The proposals emerged after both sides rejected earlier suggestions to raise taxes on fertilizers and pesticides. According to official sources, these measures are expected to be included in the IMF’s second review report, which will be released following approval of the next USD 1 billion tranche under the USD 7 billion Extended Fund Facility (EFF).
The contingency taxes would only be implemented if two conditions are met; a revenue shortfall for the first half (July–December) of the fiscal year, and an inability by the Finance Ministry to cut expenditures.
As per proposals shared by the Federal Board of Revenue (FBR), one option is to raise the General Sales Tax (GST) on imported solar panels from the current 10% to 18%, effective from January 2026, if needed. Another proposal involves increasing the withholding tax on internet services from 15% to as high as 18% or 20%.
Officials argue that the move to review solar panel taxation is linked to the growing adoption of rooftop solar systems, which has reduced reliance on grid electricity and increased capacity payments to power producers — projected to reach around Rs1.7 trillion this fiscal year.
Meanwhile, telecom experts have cautioned that higher taxes on internet services could raise connectivity costs, particularly for low-income and rural users. They warn such measures could widen the digital divide by making internet access less affordable for millions who depend on it for work, education, and communication.
The IMF has already agreed to lower Pakistan’s overall tax collection target following a downward revision in GDP growth projections — from 4.2% to between 3.25% and 3.5%. However, the FBR’s tax-to-GDP ratio target of 11% remains unchanged.
Having missed its first-quarter revenue target by Rs198 billion, the FBR now faces the challenge of collecting Rs6.7 trillion by the end of December to stay on track with IMF commitments.
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