New Islamabad Tax Proposed Under Autonomous Capital Plan

ISLAMABAD: Authorities are preparing proposals for a new local tax in Islamabad as part of discussions over potentially giving the federal capital a more autonomous administrative structure, according to officials familiar with the matter. The proposal remains under consideration and has not yet been finalised, but it could become part of the next federal budget if the broader plan advances.

The proposed levy is intended to generate revenue for services and administrative needs within Islamabad. Funds collected through the tax could be directed toward hospitals, schools, colleges, welfare programmes and the administrative framework required to operate the capital under a more autonomous arrangement. No final estimate has yet been prepared for how much revenue the measure could raise.

The Federal Board of Revenue is expected to prepare the initial taxation proposals. These would then be placed before a subcommittee examining financial and infrastructure requirements linked to the proposed administrative changes for Islamabad. If cleared at that stage, the recommendations would move to a committee headed by the planning minister before being sent to Prime Minister Shehbaz Sharif for consideration.

The taxation proposal is also expected to feature in Pakistan's upcoming discussions with the International Monetary Fund. Relevant ministries and institutions have been directed by the Ministry of Finance to compile data and reports ahead of the economic review, with officials expected to brief the IMF delegation on structural benchmarks, reform targets and progress in key sectors.

Energy-sector reforms and circular debt in the electricity and gas industries are also expected to remain part of the wider review agenda. The talks will take place as Pakistan continues implementing commitments under its Extended Fund Facility. Programme documents identify another review as an important milestone for continued financial support under the arrangement.

Successful completion of the review could enable Pakistan to receive approximately $1 billion under the next tranche of the programme. A further $200 million may also become available to address climate-related losses, potentially taking the combined disbursement to around $1.2 billion if the required conditions are met and the review concludes successfully.

For Islamabad residents and businesses, the key issue will be the eventual design of any local tax, including who would pay it, how rates would be determined and how the proceeds would be allocated. Those details have not yet been finalised. The current proposal instead represents an early-stage attempt to identify a dedicated revenue stream that could support municipal services and infrastructure if Islamabad is given a revised administrative status.

The next steps will involve preparation of the tax framework by the FBR, scrutiny by the relevant subcommittee and planning-led committee, and consideration at the federal level. Discussions with the IMF are also expected to influence the broader economic framework. Until those stages are completed, the proposed Islamabad tax and autonomous-unit plan remain under review rather than approved policy.