Finance Minister Muhammad Aurangzeb on Friday stated that the government had not imposed any new taxes in the federal budget for fiscal year 2026-27. Instead, the focus will be on broadening and deepening the tax net through improved compliance and enforcement measures.
Budget Overview and Growth Target
The finance minister unveiled the Rs18.8 trillion budget for FY2026-27 and set an economic growth target of 4 percent. He described the budget as anchored in stabilization, reform, and growth.
Strategy Against Tax Evasion
Speaking on the private television program Aaj Shahzeb Khanzada Kay Sath, Aurangzeb said the government's strategy aims to curb tax evasion, leakages, corruption, and collusion. He emphasized that deepening the tax net involves addressing areas where these issues persist, particularly in the sales tax regime.
He added that plugging leakages through stronger compliance and enforcement would generate significant additional revenues.
Revenue Base Growth
The minister noted that public debate often focuses on revenue shortfalls while overlooking the substantial growth in the country's revenue base. He highlighted that the revenue base has increased from Rs7 trillion to Rs13 trillion in recent years, doubling for the first time in the country's history.
Provincial Support and Fiscal Space
Aurangzeb thanked the provinces for supporting the federal government. He clarified that the additional fiscal space created through provincial cooperation would not be used for relief measures but for strategic requirements, such as defense and internal security challenges in two provinces.
He expressed gratitude to the provinces for agreeing due to these strategic considerations.
Relief Through Compliance
Responding to a question on providing relief without additional taxes, the minister said the objective would largely be achieved through enhanced compliance and enforcement.
Exemptions for Small Businesses
Regarding the new scheme for exemptions at the point of sale for businesses with annual sales below Rs200 million, Aurangzeb said a disproportionate tax burden has long been borne by a limited number of sectors. The government now seeks to bring the manufacturing sector, exporters, the IT industry, and the salaried class into the documented economy.
He emphasized that this should be viewed not only as relief but as a change in direction, bringing around 3.5-4 million people from small-scale businesses and SMEs into the documented economy.
Export Sector Measures
The government is significantly expanding the Export Finance Scheme and making additional funding available to exporters. Despite the policy rate at 11.5 percent, Prime Minister Shehbaz Sharif directed that exporters should access financing at 4.5 percent.
The overall tax rate for exporters has been reduced from 2 percent to 1.25 percent under the minimum tax regime. All super tax slabs have been abolished for exporters and traders with income below Rs500 million, while those above that threshold will continue to pay super tax at 8-10 percent.
Aurangzeb received special directives from the prime minister and cabinet to completely abolish the super tax on exporters, and he will work on that with his team.
Export Performance
Rejecting claims of a broader decline in exports, Aurangzeb said only rice and sugar exports recorded a downturn. Exports of higher value-added textiles and sports goods increased, and he expressed confidence that IT exports would reach $4.5 billion during the current fiscal year.
Geopolitical Situation
The minister praised the prime minister and the field marshal for their role in addressing the conflict between Iran and the United States, expressing hope that tensions would ease soon. He cautioned that the government should maintain a buffer even if petroleum prices decline after a resolution, as damage to energy infrastructure could have lasting economic consequences.
He noted that while progress can be achieved through Pakistan's leadership's efforts, the effects of the situation will extend into next year, and the country must prepare for that.
