The federal government is evaluating proposals to increase taxes on key agricultural inputs as part of its upcoming 2025–26 federal budget, including plans to double the existing excise duty on fertilisers and introduce a new tax on pesticides, The Express Tribune reported, citing senior tax officials.
The current 5% Federal Excise Duty (FED) on fertilisers could be raised to 10%, while pesticides—previously untaxed—may face a new duty of either 5% or 10%. These measures are expected to generate an estimated Rs50 billion in additional revenue.
The proposed tax hikes are part of the government’s broader fiscal strategy to achieve a revenue target of Rs14.3 trillion for the next fiscal year, reflecting a 16% increase over the revised target for the current year. These initiatives are also aligned with Pakistan’s commitments under its agreement with the International Monetary Fund (IMF), which has urged the government to reduce market distortions in the agriculture sector.
According to IMF and government officials, the overuse of fertilisers has contributed to environmental degradation and price fluctuations, hindering innovation and efficiency in agricultural markets. However, farmers have long voiced concerns about rising input costs, warning that higher taxes could intensify pressure on an already struggling sector.
In addition to the excise duties, the government is also moving forward with plans to introduce income tax on agricultural earnings. Under the new proposal, farmers could be taxed at rates as high as 45% on income generated from January 2025 onwards. This marks a significant policy shift, as agricultural income has traditionally remained exempt from federal income taxation.
Another key element under review is the super tax levied on high-income individuals and corporations. While industry groups have called for its complete removal, the government is reportedly considering a 2% reduction—from the current 10% to 8%—depending on its ability to identify alternative revenue sources.
Discussions between Pakistan and the IMF are scheduled to resume on May 14, 2025, to finalise the tax framework for the next fiscal year. Government officials remain optimistic about meeting the ambitious revenue target without imposing further levies, though analysts note that adjustments may be necessary based on the outcome of these negotiations.