The federal government is considering a new local tax for Islamabad as part of a plan to turn the federal capital into a separate administrative unit, according to Finance Ministry sources.
The proposal has been prepared to generate funds for running Islamabad’s public services and its proposed administrative structure.
However, the plan is still under consideration and no new tax has yet been imposed yet.
Revenue to be spent in Islamabad
Money collected through the local tax would be used only within Islamabad. The funds could support hospitals, educational institutions, welfare programmes and administrative infrastructure.
Finance Ministry reportedly said the proposed tax would help create additional fiscal space for the capital. Islamabad’s infrastructure and future development needs are also being considered in the plan.
The government has proposed including the new tax in the budget for the next fiscal year.
Moreover, the tax proposal will have to pass through several stages before any final decision is made.
It will first be presented to a subcommittee examining taxation issues linked to Islamabad becoming an autonomous administrative unit. It will move to a committee headed by Planning Minister Ahsan Iqbal after approval.
The proposal would then be presented to Prime Minister Shehbaz Sharif.
Additionally, the matter is also expected to be discussed with the International Monetary Fund during upcoming economic review negotiations.
Moreover, the tax proposal comes as PMLN’s Islamabad chapter has backed a proposal to give the capital provincial status. Supporters argue that Islamabad residents pay federal taxes but do not receive a share through the National Finance Commission Award in the same way as provinces.
For now, however, both Islamabad’s proposed new administrative arrangement and the related local tax remain proposals. The final structure, tax rate, collection and expected revenue have not yet been announced.