The federal government has decided to raise token tax rates for private, public service, and commercial vehicles in Islamabad to increase revenue.

According to sources, the Cabinet recently approved a proposal from the Ministry of Interior and Narcotics Control to amend the decades-old West Pakistan Motor Vehicles Taxation Act, 1958, under which token taxes are currently levied.

The Excise and Taxation Department, ICT, handles vehicle registration, transfers, and the collection of taxes and duties on behalf of the federal government.

Token tax rates had not been changed since 2019, limiting the department’s ability to generate revenue. In the fiscal year 2024-25, the department collected Rs. 4.29 billion and has set a target of Rs. 4.5 billion in the 2025 Finance Bill.

The Cabinet was informed that outdated rates not only affected revenue collection but also made Islamabad’s tax system inconsistent with provincial frameworks.

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The proposed increase aims to align rates with other regions and improve efficiency in tax administration.

To implement the changes, the ICT Administration has submitted a draft law titled the “West Pakistan Motor Vehicles Taxation (Amendment) Act, 2025.” The bill suggests revised token tax rates for all vehicle categories and allows ICTA to retain any revenue collected beyond the Rs. 4.5 billion target for its own development projects.