IMF EV Tax Dispute Delays Pakistan Auto Policy

The IMF EV tax dispute has disrupted Pakistan’s proposed vehicle tax changes. The government suggested a 1% sales tax on new energy vehicles. However, the International Monetary Fund rejected this plan and demanded standard taxation. Officials proposed lower taxes to support electric and hybrid adoption. For example, they suggested halving tax rates for hybrid vehicles. Yet, the IMF insisted on applying the full 18% sales tax rate.

Policy disagreements delay decisions

The disagreement has delayed the Auto Policy 2026-31. Meanwhile, internal talks between ministries have not reached a conclusion. Meetings led by senior officials also failed to resolve the issue. The Ministry of Commerce and the Ministry of Industries remain divided. Therefore, policy alignment has become difficult. The auto policy must match the National Tariff Policy rules.

IMF suggests alternative relief

Instead of tax cuts, the IMF recommended direct subsidies. This approach would support buyers without changing tax structures. As a result, officials must rethink their strategy. Authorities also need to provide further clarification to the lender. Consequently, negotiations may continue for several days. This delay creates uncertainty for investors and manufacturers.
Budget timeline adds pressure
Time pressure is increasing as the budget deadline approaches. Lawmakers must finalize tax and duty changes before approval. The National Assembly is expected to pass the budget soon. The current auto policy will expire this month. Therefore, delays could affect market stability. In addition, automakers may struggle to plan future investments.