Finance Act 2025: businesses bear brunt of tax reforms

The taxpayers of Pakistan have started feeling the aftershocks of the Finance Act 2025, which came into effect from July 1, 2025. The federal government has set an ambitious revenue target of Rs19.278 trillion for fiscal year 2025-26, from which the tax revenue target is Rs14.131 trillion. This marks a significant jump compared to the revised target of Rs11.9 trillion for fiscal year 2024-25. The government claims that it is focusing more on direct taxation, supported by the increased target of Rs6.9 trillion for direct taxes, compared to Rs5.826 trillion last year. However, the reality is that a large chunk of the direct tax revenue continues to be collected indirectly through advance taxes and withholding mechanisms.