KMC plans 1pc entertainment tax on hotels, marriage halls to raise Rs1bn

KARACHI: The Karachi Metropolitan Corporation (KMC) is preparing to introduce a new levy on hotels, restaurants, guest houses, lodges, marriage halls, marquees, marriage lawns, Airbnb properties and wedding banquet facilities, with officials estimating that it could generate Rs1 billion annually if approved by the City Council.

According to a public notice issued by Municipal Commissioner Abrar Jaffar, the proposed levy has been described as an entertainment tax and will be discussed as part of the corporation’s budget for the next financial year. The notice invites public feedback on the proposal, while a hearing on objections and suggestions has been scheduled for June 10 at the KMC head office.

Under the proposal, the tax would be collected at the rate of one per cent of the total bill issued by hotels, marriage halls and other covered establishments. The notice said the KMC tourism department was seeking to strengthen the municipal body’s finances and improve public services by adding a new category, Entertainment Tax – City Tourism and Hospitality, to the existing tax gazette along with the relevant bylaws.

The notice further stated that the Sindh Local Government Act, 2013 authorises KMC to impose taxes, rates, tolls and fees within its jurisdiction. Officials said the corporation sees the proposed entertainment tax as a potentially important source of revenue.

"We are eyeing the generation of one billion rupees through the entertainment tax," a KMC spokesperson said, responding to a query on expected collections.

Second major tax expansion move

The proposed levy would mark KMC’s second major step to widen its tax base after the Municipal Utility Charges and Taxes (MUCT), which began being collected through K-Electric bills in July 2024. That levy generates around Rs4 billion annually from Karachi residents.

Karachi Mayor Barrister Murtaza Wahab has said on multiple occasions that income from the MUCT is being spent on development works in the city and on the payment of pensions and other dues owed to municipal employees. The agreement between KMC and K-Electric was signed in June 2022, but became operational from July 2024 after receiving City Council approval.

Under that arrangement, K-Electric collects MUCT from domestic and non-domestic consumers located within KMC limits through monthly electricity bills.

Opposition and employee representatives raise concerns

Opposition members, critics and leaders representing KMC employees have questioned whether the stated objectives of the MUCT have been achieved. Opposition Leader in the City Council Saifuddin Advocate did not oppose the entertainment tax itself, but challenged the performance of the Pakistan Peoples Party-led city administration and asked how it could justify new revenue measures if earlier collections had not been used properly.

"You [Mayor Wahab] should tell us what work has been carried out with the Rs4 billion collected under the MUCT, and how it has provided relief to the people of Karachi," he said, addressing Mayor Wahab.

"Why is Karachi’s money not being spent on its residents? What improvements have been made to Karachi’s infrastructure over the last one-and-a-half years since you began collecting MUCT? So it’s not about revenue generation; it’s solely about the exploitation of financial resources," he further said.

KMC Sajjan Union (CBA) chief Zulfiqar Shah also said retired employees were still awaiting pensions and other pending payments. "MUCT has brought us no benefit," he said, adding that, "Our workers have been suffering since 2019. The total dues owed to our workers amount to Rs14 billion. So far, our share has consisted only of promises and assurances."