Federal Govt plans mini-budget for flood relief and tax shortfall

ISLAMABAD, September 17, 2025 – The federal government is preparing to present a mini-budget that aims to generate at least Rs50 billion. The move is intended to fund flood victims’ rehabilitation and address the widening tax revenue shortfall.

New Taxes on Luxury Goods and Cigarettes

Officials from the Federal Board of Revenue (FBR) confirmed that new levies on luxury items, cigarettes, and imported electronic goods are being reviewed.

• A five per cent levy on electronic goods is under consideration. The final price threshold for this tax has not yet been decided.

• A new levy will be imposed on luxury vehicles with engines of 1,800cc and above. However, this requires IMF approval before implementation.

• The government is also planning to impose a Rs50 levy on each pack of cigarettes. This revenue will not be shared with provinces and will go directly to the federal government.

Revival of Regulatory Duty on Imports

The mini-budget may also reinstate levies equal to the regulatory duty that was reduced in June 2025. This means imported products could again face higher taxes, making them more expensive for consumers.

Why the Mini-Budget Is Needed

The FBR revealed a tax collection shortfall of Rs50 billion in August 2025. Against a target of Rs951 billion, only Rs901 billion was collected.

Between July and August, overall revenue fell short by nearly Rs40 billion compared to projections. The government had set a revenue target of Rs14,131 billion for FY2025, but floods, lower gas and electricity consumption, and sluggish business activity have slowed tax collection.

Impact on the Public

If approved, the mini-budget will increase prices of luxury cars, imported electronic goods, and cigarettes. Officials say the measures are temporary but necessary to stabilize revenue and ensure resources for flood rehabilitation.