Pakistan is set to introduce sweeping tax reforms in its 2025-26 budget, with digital creators including freelancers and YouTubers now in the crosshairs of revenue authorities. The government plans to raise an additional Rs500-600 billion through measures that will significantly expand the tax net while implementing some selective relief measures.
For the first time, income earned through social media platforms like YouTube and TikTok will be taxed at 3.5%, a move expected to generate Rs52.5 billion. This comes alongside stricter enforcement against non-filers, who may be barred from major economic transactions like property and vehicle purchases.
High-earning pensioners will also face new taxes, with a 2.5-5% levy proposed on monthly pensions exceeding Rs400,000. This could yield Rs20-40 billion as the government grapples with ballooning pension costs that have already reached Rs673 billion this fiscal year.
The tax base will expand through several other key measures:
• GST calculations for essential goods like sugar will align with actual market prices rather than outdated benchmarks, potentially adding Rs70-80 billion
• A new “health tax” will impose 20% higher duties on processed foods like snacks and biscuits, eventually reaching 50% by 2029
• Fuel taxes will increase through a Rs5/liter carbon levy on petrol and diesel, plus new taxes on furnace oil
While these measures aim to satisfy IMF requirements – including a Rs295 billion retail sector target – some relief may come for salaried individuals and the real estate sector. The budget, scheduled for June 2, represents a delicate balancing act as Pakistan seeks to stabilize its economy while maintaining growth momentum.
Digital creators and freelancers, previously operating in a tax gray area, will now need to factor compliance into their business models as Pakistan modernizes its revenue collection for the digital economy era. The moves come as part of broader efforts to formalize Pakistan’s growing gig economy and digital entrepreneurship ecosystem.
Also read: Pakistan’s salaried class tax relief hinges on IMF approval
