New Taxes Proposed on Digital Services, Gaming, 2nd Homeownership, and Corporate Advertising

The Institute of Cost and Management Accountants of Pakistan (ICMA) has proposed a wide range of new taxes and policy measures for the upcoming Budget 2026-27, targeting digital services, online gaming, corporate advertising, and second-home ownership in a bid to expand the country’s narrow tax base.

The proposals were submitted to the Tax Policy Office (TPO) under the Ministry of Finance, with ICMA stating that the recommendations are based on economic priorities, sectoral challenges, and global best practices aimed at documentation and revenue generation.

ICMA has recommended the introduction of a Digital Services Tax (DST) to capture revenue from the rapidly growing digital economy, including streaming platforms, mobile applications, gaming, and other online services. The measure is aimed at formalizing digital business activity and ensuring fair taxation.

In addition, the body has proposed a regulated licensing regime for online and speculative gaming, suggesting that only licensed operators be allowed to function under government oversight.

A 2 percent tax on gross revenues has been recommended to convert the largely informal sector into a documented and revenue-generating industry.

To increase revenue from large businesses, ICMA has proposed a levy on corporate advertising and brand promotion spending for companies with annual turnover exceeding Rs. 100 million. The tax would be implemented using existing invoicing systems to minimize compliance burden.

Another key proposal is the Additional Residential Property Tax (ARPT) on second homes or investment properties valued above Rs. 20 million. Primary residences and first-time buyers would remain exempt. The measure is aimed at discouraging speculative real estate investments and improving housing availability.

ICMA has also suggested a Financial Transaction Tax (FTT) on equities, derivatives, and digital asset trades to tap into financial market activity.

To resolve long-pending tax disputes, a one-time settlement scheme has been proposed, allowing taxpayers to settle cases by paying a reduced portion of the disputed amount.

The institute further recommended launching a National Consumer Receipt Lottery, where consumers submitting verified purchase receipts could win cash prizes, encouraging documentation of retail transactions.

A Windfall Gains Tax has been proposed for sectors such as sugar, oil and gas, and fertiliser during periods of abnormal profits driven by global price shocks. The aim is to ensure that extraordinary gains also benefit the public.

Urban Development and Construction Reforms

ICMA has proposed the adoption of Building Information Modelling (BIM) nationwide to digitise planning and monitoring of infrastructure projects, improving efficiency and transparency.

It also recommended a Commercial Building Safety Levy (BSL) of 0.25 percent on commercial property transactions, along with tax incentives for certified green buildings, including a 1.5 percent concession on financing costs and rental income.

On the environmental front, ICMA has proposed several green taxes and incentives, including:

According to ICMA, these measures are designed to promote sustainable development, encourage cleaner technologies, and generate dedicated funding for environmental initiatives.

Even a 1 percent more tax on online services will prove a rapid decline in IT sector projection in formal sector as there are more safe ways to park foreign income abroad. And it will indirectly flourish the informal channels.