ISLAMABAD – A major change could be on the horizon for Islamabad as the government weighs making the capital an autonomous unit, residents may also be looking at a new local tax, with the proposed revenue said to fund hospitals, schools, infrastructure and basic services within the city.
Sources said the government started looking into proposals to generate independent revenue for the federal capital, with funds potentially collected and spent exclusively within Islamabad’s boundaries. The development comes at a crucial time as Pakistan prepares for negotiations with the International Monetary Fund (IMF) over the fifth review of its Extended Fund Facility (EFF) programme, expected to begin this month.
According to sources, the proposed tax mechanism could become a key part of Islamabad’s planned financial structure if the capital is granted greater administrative autonomy.
NEW TAXES FOR ISLAMABAD
Under the initial proposals, revenue generated through local taxation would be used to finance and improve essential public services and infrastructure across Islamabad.
The funds could be allocated to Hospitals and healthcare facilities, Schools, colleges and other educational institutions, Welfare programmes, Administrative services and Basic infrastructure and development projects.
The central idea behind the proposal is to ensure that revenue generated within Islamabad remains available for spending within Islamabad, creating greater financial capacity for the capital’s expanding infrastructure and public service requirements.
However, officials are still working on the details, and a final estimate of how much revenue could be collected, and what form the proposed tax would take, has yet to be determined.
The tax proposals are expected to be discussed during Pakistan’s upcoming economic review negotiations with the IMF. The new local tax could potentially be introduced in the next fiscal year’s federal budget, depending on the outcome of consultations and approvals. The process is expected to begin with the Federal Board of Revenue (FBR), which will prepare the initial tax proposals.
These proposals will then move through a series of high-level committees. First, they will be presented before the relevant subcommittee dealing with infrastructure and taxation for Islamabad’s proposed autonomous structure. Following approval, the recommendations will be sent to a committee chaired by the Minister for Planning.
If approved at that level, the proposals will eventually reach Prime Minister Shehbaz Sharif before a final decision is taken in consultation with the IMF.
Ministry of Finance has directed all relevant ministries and government institutions to compile the necessary data and reports ahead of the IMF negotiations. Officials are expected to brief the IMF delegation on Pakistan’s structural benchmarks and economic reform targets.
The upcoming review is also expected to place major focus on Pakistan’s troubled energy sector.
The stakes for Pakistan are high. Sources say that successful negotiations and a positive IMF review could clear the way for the release of the fifth tranche worth approximately $1 billion under the existing loan programme.
Pakistan could also receive an additional $200 million to help address losses and challenges linked to climate change. That would bring the potential total disbursement following a successful review to approximately $1.2 billion.
The proposed local tax system is reportedly part of a broader roadmap aimed at redesigning how Islamabad is governed and financed. Sources say policymakers are considering a new framework for the collection and use of local taxes, distribution of resources and management of financial affairs as part of the proposed autonomous structure.
The objective is to create a more financially sustainable administrative model for Islamabad while ensuring that the capital has sufficient resources to maintain infrastructure and deliver essential services.
International financial institutions are also expected to contribute recommendations aimed at strengthening the efficiency and effectiveness of the proposed tax system.
Islamabad New Administrative Model: Chief Minister, 27-Member Assembly, New Powers – EXPLAINED
