NA body rejects 18% solar panel tax amid IMF pressure

ISLAMABAD: Pakistan’s NA finance committee rejected a controversial proposal to impose an 18 percent sales tax on solar panels, the revenue drive by tax authorities attempting to meet IMF-backed fiscal targets.

The move, which would have generated an estimated Rs20 billion ($71 million), was struck down unanimously during a meeting chaired by MNA Syed Naveed Qamar on Tuesday. “Solar is not a luxury, it’s a necessity,” he said. “We won’t allow taxation that discourages clean energy.”

The decision signals growing political resistance to the stringent fiscal consolidation required under Pakistan’s new $7 billion IMF programme. Finance Minister Muhammad Aurangzeb, defending the tax push, told lawmakers the government had little room for sector-specific relief. “All subsidies will be phased out,” he said.

FBR Chairman Rashid Langrial defended the proposal, citing massive solar imports of 32,000 MW over the past five years — of which 13,000 MW remain unutilised — and instances of over-invoicing. But, lawmakers from all parties pushed back, with MNA Shahida Akhtar Ali urging the government to “tax sugary drinks instead and spare solar.”

The tax authority also revised its controversial arrest powers for tax fraud suspects, restricting detentions to high-value cases involving over Rs50 million and only if suspects ignore three official notices or risk destroying evidence. This move follows Senate recommendations for checks on arbitrary arrest powers. Critics like MNA Nafisa Shah warned the FBR against overreach, calling for safeguards to prevent abuse. “These are harsh laws,” she said.

Separately, the FBR also unveiled plans to tighten enforcement against unregistered businesses. “We’ll start by blocking their bank accounts. If they still don’t register, we’ll freeze accounts and seal premises,” Langrial warned.

On illicit cigarette sales, he asked for permission to involve local administrations in enforcement, prompting pushback from lawmakers. “This will only fuel bribery,” said Sharmila Faruqi. PTI’s Omar Ayub Khan warned that giving police powers in tax matters would “do more harm than good”.

Committee members urged the FBR to fix its systems first. “Let the framework mature before tightening the noose,” Qamar advised.