Vehicle owners in Islamabad may soon face higher annual token tax payments after a revised taxation framework received approval from the National Assembly Standing Committee on Finance. The new system aims to modernize the existing tax structure and increase government revenue by linking token tax directly to a vehicle’s value rather than relying solely on engine capacity categories.
Shift to Value-Based Taxation
Under the newly approved model, annual token tax for vehicles registered in the Islamabad Capital Territory (ICT) will be calculated as a percentage of the vehicle’s invoice price. Authorities believe this approach is more reflective of a vehicle’s actual market value and ensures that owners of more expensive vehicles contribute proportionately higher taxes.
Vehicles with engine capacities ranging from 1,001cc to 2,000cc will be subject to a tax rate of 0.25 percent of the invoice value. For vehicles exceeding 2,001cc, the applicable rate will rise to 0.35 percent.
What Vehicle Owners Can Expect
Government officials shared several examples to illustrate the impact of the revised rates. A vehicle valued at approximately Rs5.2 million in the 1,001cc to 1,300cc category would incur an annual token tax of around Rs13,000.
Similarly, owners of vehicles in the 1,301cc to 1,500cc category could expect to pay roughly Rs16,250 annually, while those with vehicles between 1,501cc and 2,000cc may face taxes of about Rs20,000 per year.
The burden increases further for larger vehicles. Cars falling within the 2,001cc to 2,500cc range are expected to pay approximately Rs35,000 annually, whereas vehicles above 2,500cc could attract token taxes of nearly Rs70,000 each year.
Revenue Collection Expected to Rise
One of the key objectives behind the revised policy is to increase tax collection. According to official estimates, annual token tax revenue from Islamabad is projected to increase from nearly Rs3.9 billion to approximately Rs5.2 billion after implementation of the new framework.
Officials argued that the existing token tax system had remained largely unchanged since 2019 despite substantial increases in vehicle prices over recent years. As a result, authorities believe the current rates no longer reflect market realities.
Lawmakers Raise Concerns
During committee discussions, several members expressed reservations about the significant increase in tax liabilities for vehicle owners. Concerns were raised regarding affordability and the financial pressure that additional taxation could place on citizens already dealing with rising living costs.
Some lawmakers questioned whether revenue generation should take precedence over public affordability, especially at a time when inflation continues to affect household budgets.
Government Defends the Move
In response, officials maintained that the revision was necessary to align taxation with current vehicle values and ensure a fairer distribution of tax responsibilities. They also pointed out that Islamabad’s rates have historically remained lower than those implemented in some other regions.
Authorities further noted that Punjab has already adopted a similar value-based approach for the upcoming fiscal year, applying percentage-based token taxes according to vehicle categories.
Looking Ahead
With committee approval secured, the revised token tax structure is expected to take effect in the next fiscal year. The move marks a significant change in vehicle taxation policy in Islamabad and is likely to have a noticeable impact on vehicle owners, particularly those with newer and higher-value cars.
While the government views the reform as a necessary step toward modernizing tax collection and increasing revenue, its long-term public acceptance may depend on how effectively authorities balance fiscal objectives with affordability concerns for citizens.