IMF agrees to scrap proposed solar panel tax increase for Pakistan

ISLAMABAD: The International Monetary Fund (IMF) has agreed to withdraw a proposed increase in taxes on solar panels and stationery items after intervention from Prime Minister Shehbaz Sharif, government sources said.

The decision comes as Pakistan prepares its federal budget for the fiscal year 2026-27 and continues discussions under the IMF bailout programme.

According to sources, the IMF has formally dropped the plan to raise sales tax on solar panels from 10% to 18%. A similar proposal to increase taxes on stationery products has also been removed.

Officials said this move is being seen as a relief for consumers, especially at a time when inflation remains a major concern.

Sources also confirmed that the tax structure for the stock market will remain unchanged from July 1, 2026.

However, negotiations are still ongoing between Pakistan and the IMF on other areas, including possible tax adjustments in the real estate sector.

The government is also considering raising the threshold for the highest income tax slab for salaried individuals. In addition, a surcharge on high-income earners is under review and may be removed.

Exporters may also receive relief, as authorities are considering ending a 1% export tax as part of a broader support package.

A tax official said that special measures for exporters may be announced in the upcoming budget speech.

The changes follow earlier reforms under the Finance Act 2024, which shifted exporters from the Final Tax Regime (FTR) to the Normal Tax Regime (NTR), changing the taxation structure on export income.

Export associations have urged the government to restore the FTR option, ensure timely sales tax refunds, and provide targeted relief to struggling exporters. They have also called for protection from excessive audits under the Federal Board of Revenue (FBR).

The federal budget for FY 2026-27 is expected to be presented on June 12, where IMF-backed measures will be officially announced.