The International Monetary Fund (IMF) has opposed proposals to provide tax concessions on imported electric vehicles (EVs) in the upcoming federal budget 2026-27.Sources said the IMF has recommended increasing the sales tax on imported electric vehicles to 25 per cent, instead of the current concessional rate of 1 per cent. The lender has also objected to extending further tax relief for imported EVs. 

Meanwhile, Prime Minister Shehbaz Sharif has directed officials to safeguard employment opportunities linked to Pakistan’s local automotive industry and support domestic manufacturing. As part of measures aimed at promoting local industry, the government is considering a range of incentives in the next fiscal year’s budget. These include tax concessions on raw materials used by domestic vehicle manufacturers. 

According to sources, the tax rate on raw materials for the local automobile industry could be reduced to 1 per cent, while import duties on components used in local vehicle parts manufacturing may be cut from 10 per cent to 5 per cent. Budget 2026-27: Salaried class set for ‘tax cuts’ under new proposalsIn addition, the tax on imported components for local vehicle assembly could be reduced from 20 per cent to 10 per cent. 

Sources further stated that local vehicle manufacturers may be required to comply with 62 safety and quality standard tests under proposed regulatory measures. The government is also considering a gradual reduction in taxes on imported sport utility vehicles (SUVs), with rates potentially falling from 50 per cent to 40 per cent over the next five years.

Credit: Independent News Pakistan (INP)