Govt May Impose 1.5% Tax on Import Payments in Upcoming Budget

The government is considering imposing a 1.5 percent withholding tax on the value of imports. The proposal targets commercial importers and is expected to become the largest revenue source in the FY2025–26 budget.

The tax would be collected when banks process remittances to overseas suppliers, replacing the current system where importers pay withholding tax upon filing goods declarations with Customs, reported Express Tribune.

The amount would be adjustable against the importers’ final tax liabilities.

The Federal Board of Revenue (FBR) has briefed the International Monetary Fund (IMF) on plans to collect taxes at the goods arrival, shipment, and foreign payment stages. IMF approval is pending, but the government needs it to achieve a tax target exceeding Rs. 14 trillion in FY26.

The policy also aims to curb under-invoicing by linking tax deduction directly to payment transactions. Banks would act as withholding agents, similar to their role in collecting tax on foreign credit card payments.

It bears mentioning that the FBR has increasingly relied on indirect taxes. Last year’s 20 percent federal excise duty (FED) on packaged juices, in addition to 18 percent GST, led to a 45 percent decline in sales. The industry is seeking a reduction in FED to 15 percent.