ISLAMABAD: The International Monetary Fund (IMF) has expressed its opposition to proposals for granting tax benefits on imported electric vehicles (EVs) in the upcoming federal budget for 2026-27.
Insiders revealed that the IMF has recommended raising the sales tax on imported EVs to 25 percent, a significant increase from the current preferential rate of 1 percent. The organization has also voiced objections to further extending tax exemptions for imported electric vehicles.
Meanwhile, Prime Minister Shehbaz Sharif has instructed officials to prioritize protecting employment opportunities linked to Pakistan’s domestic automotive sector and to bolster local manufacturing initiatives.
In line with efforts to promote the national industry, the government is exploring a variety of incentives for the next fiscal year’s budget. These include potential tax reductions on raw materials essential for domestic vehicle production.
Sources indicated that the tax on raw materials for local automakers could be lowered to 1 percent. Additionally, import duties on components used in vehicle assembly and manufacturing might be reduced from 10 percent to 5 percent.
Furthermore, the tax imposed on imported parts for local vehicle assembly could be cut from 20 percent to 10 percent under new regulatory plans.
It is also expected that local vehicle manufacturers will need to meet 62 safety and quality standards as part of proposed regulatory reforms.
The government is also contemplating a phased approach to reduce taxes on imported SUVs, with rates possibly decreasing from 50 percent to 40 percent over the next five years.
