Sources revealed that Pakistan’s federal government plans to escalate its “war on cash” in the 2025-26 budget, introducing differential tax and transaction rates to promote digital payments across sectors, including fuel pricing.
Finance Minister Muhammad Aurangzeb is scheduled to announce measures on June 10, aimed at documenting the economy and reducing tax evasion.
The Pakistan government is implementing a war on cash to encourage digital transactions. This includes lower tax rates for digital payments, while cash transactions will incur higher costs. For example, petrol pumps across the country will provide digital payment options such as QR codes and cards. However, cash sales will incur an additional charge of Rs 2- 3 per litre.
In terms of taxation, businesses will apply an 18% Goods and Services Tax (GST) on digital payments, while cash transactions will be subject to a 20% GST. This structure aims to incentivise a shift toward digital payments. Additionally, the proposed budget for 2025-26 includes a tax reduction of 1-1.5% for salaried workers to help alleviate financial burdens.
FBR’s Strategy and Challenges
The Federal Board of Revenue (FBR), which has been struggling to document retail for two decades, has collaborated with banks, petroleum firms, and consultancies to refine the FBR cashless economy plan, per Business Recorder. FBR Chairman Rashid Mehmood Langrial emphasised, “We must move towards a cashless economy.” Unlike past filer/non-filer policies, this broader approach targets small businesses with simple digital solutions, drawing inspiration from India and Indonesia. However, tariff rationalisation risks Rs150-200 billion in revenue losses.
Aurangzeb estimates Pakistan’s economy at $700 billion, with Rs7 trillion in tax evasion annually, per Pakistan Today. The differential tax rates aim to tap Rs9.3 trillion in cash circulation, boosting revenue. A digital tracking bill for petroleum products, introduced last month, complements this, curbing Rs300-500 billion in smuggling losses.
The Pakistan war on cash could transform Pakistan’s economy, enhancing transparency and revenue. As the FBR cashless economy initiative aligns with global trends, its success hinges on implementation and public adoption, shaping Pakistan’s path to a potential $700 billion economy and G20 aspirations.
