Prime Minister Shehbaz Sharif has rejected two significant budgetary proposals put forth by the Federal Board of Revenue (FBR) aimed at increasing revenue.

The proposals included raising the standard rate of sales tax from 18 to 19 per cent and imposing an 18 per cent sales tax on petroleum products, often referred to as a “carbon tax”.

The FBR had suggested a 1 per cent increase in the sales tax rate, projecting an additional revenue generation of Rs40-50 billion for the fiscal year 2024-25. However, Prime Minister Sharif declined this proposal, citing the potential for immediate inflationary effects on the general public.


In response, the Prime Minister directed the FBR to enhance its enforcement and administrative measures and to draft alternative proposals targeting untaxed or under-taxed sectors of the economy. Additionally, he instructed the FBR to consider proposals to increase taxes on non-essential and luxury items.

The second proposal, which aimed to impose an 18 per cent sales tax on petroleum products, was also rejected due to its likely inflationary impact on the public.

According to sources, out of the total proposed measures worth Rs1,200 billion to Rs1,300 billion by the FBR, the government is anticipated to approve measures amounting to approximately Rs400-500 billion.