The government on Monday declined to disclose the cost of tax relief measures to the National Assembly's standing committee on finance, which is responsible for approving the new budget. However, the committee's chairperson indicated that the cost amounted to approximately Rs360 billion.
Finance Secretary Cites IMF Discussions
Finance Secretary Imdadullah Bosal stated that the government is in discussions with the International Monetary Fund and therefore cannot reveal these numbers. He made this remark in response to a question from MNA Jawed Hanif Khan. Bosal emphasized that any tax relief must be offset by equivalent additional revenue and enforcement measures, aligning with the IMF agreement.
Despite the refusal to share details with the full committee, Bosal confirmed that the relief cost had been privately shared with the committee's chairman, Naveed Qamar. When Khan asked if the cost was Rs360 billion, Qamar replied that Khan was very close. Later, Qamar confirmed the cost was roughly Rs360 billion.
Breakdown of Tax Relief Measures
Earlier reports by The Express Tribune indicated that the government provided Rs360 billion in tax relief, including Rs115 billion for the property sector and Rs52 billion for the salaried class. The finance ministry had informed the federal cabinet that reducing withholding taxes for the property sector alone cost Rs115 billion.
Sources revealed that the government is still in talks with the IMF, which is not entirely comfortable with halving tax rates on property sales and purchases. MNA Hina Rabbani Khar, a standing committee member, criticized the government's refusal to share relief costs with legislators as unprofessional.
The cabinet was also informed about other relief measures: reducing federal excise duty on air tickets cost Rs24 billion, lowering withholding tax on international debit and credit card transactions to 0.5% cost Rs17 billion, and abolishing the 1% capital value tax on foreign transactions cost Rs7 billion. Minister of State for Finance Bilal Kayani noted that people were circumventing high taxes on business class tickets by upgrading after boarding or booking abroad.
Hamid Ateeq Sarwar, a member of the strategic transformation wing of the Federal Board of Revenue, explained that the capital value tax was abolished due to demands from foreign countries and to prevent Pakistanis from becoming non-residents to avoid the tax.
Committee Seeks Clarity on Revenue Losses
Chairman Qamar sought clarity on whether anticipated revenue losses had been adequately quantified and requested details of the government's strategy to offset any fiscal shortfall. The committee also deliberated on relief for salaried individuals amid persistent inflation and rising living costs, questioning whether proposed tax slab revisions would provide meaningful relief to middle-income groups.
Kayani responded that maximum possible relief had been extended to salaried persons. Qamar stressed that tax relief measures must be equitable and economically justified, emphasizing the need to broaden the tax base and improve compliance. He directed the Ministry of Finance and FBR to submit detailed revenue estimates, fiscal impact assessments, and implementation plans before further consideration of the Finance Bill 2026.
Abolition of Advance Income Tax for Exporters
Sarwar informed the committee that the government has decided to abolish the requirement of paying advance income tax for exporters, a move expected to address liquidity issues. He also noted that the government collects roughly Rs400 billion annually from the super tax, which cannot be immediately abolished. The super tax was introduced as an emergency measure years ago.
The budget proposes abolishing the super tax on annual incomes of Rs500 million and charging an 8% rate on higher incomes. However, for banks, oil and gas exploration companies, and fertilizer firms, the rate will be 10%. Sarwar pointed out that banks' lending to the government had increased to 80% of total lending after ending advance-to-deposit ratio limits, leaving little money for private sector borrowers.
Budget Package Overview
The committee was informed that the budget package includes eleven relief measures, ten rationalization measures, and five administrative reforms aimed at promoting economic growth, encouraging investment, enhancing documentation, improving tax compliance, and strengthening revenue collection.
Kayani said the government abolished the 18% sales tax on the shipping industry, learning from the Middle East conflict and recognizing the need to develop the local shipping industry. Qamar noted that the tax was abolished after the National Logistic Cell took over Pakistan National Shipping Corporation. The committee was also told that the relief package includes abolition of taxes on contraceptives and selected women's products.
