The federal government has approved an upward revision of token tax rates for private, commercial, and public service vehicles registered in Islamabad.
The decision, aimed at strengthening revenue collection, was taken during the Cabinet’s recent meeting on a proposal submitted by the Ministry of Interior and Narcotics Control.
Amendments to the Old Tax Law
Currently, token taxes are charged under the West Pakistan Motor Vehicles Taxation Act of 1958, a law that has remained largely unchanged for decades. Officials explained that the rates had not been revised since 2019, which restricted the Excise and Taxation Department’s ability to generate adequate revenue.
For the fiscal year 2024-25, the department reported revenue of Rs. 4.29 billion and set a collection target of Rs. 4.5 billion under the Finance Bill.
However, the Cabinet was informed that the outdated tax framework was out of step with provincial taxation systems and limited the efficiency of revenue administration.
Proposed Legislative Changes
To address this gap, the ICT Administration (ICTA) has drafted the West Pakistan Motor Vehicles Taxation (Amendment) Act, 2025. The proposed law seeks to revise token tax rates across all categories of vehicles.
It also recommends allowing ICTA to retain any revenue collected above the Rs. 4.5 billion target, enabling the administration to reinvest the surplus into its own development initiatives.
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