ISLAMABAD - Chairman of Economic Policy and Business Development, an economic think tank, and former minister Dr Gohar Ejaz has termed the tax relief announced for salaried individuals in the federal budget 2026-27 as inadequate, arguing that the government missed an opportunity to provide meaningful support to Pakistan’s struggling middle class and stimulate economic growth. Reacting to the budget proposals unveiled by the government, Ejaz said the reduction in tax burden for salaried taxpayers falls short of expectations at a time when inflation, rising utility costs, education expenses and healthcare charges continue to squeeze household incomes. “The proposed tax relief for the salaried class in the 2026-27 budget is not enough,” he said, urging the government to further revise the tax measures during the budget approval process.
According to Ejaz, the salaried class remains the most documented and tax-compliant segment of the economy, yet continues to shoulder a disproportionately high tax burden. He maintained that excessive taxation on middle-income households has significantly weakened their purchasing power and ability to meet essential family expenses. “The salaried class is the most important segment of the economy. Let the middle class become the engine of growth for Pakistan,” he said, adding that stronger consumer spending would revive economic activity, boost business confidence and ultimately generate additional revenues for the government through indirect taxes.
Calling for a major restructuring of the income tax regime for salaried individuals, Gohar proposed a simplified three-tier tax structure. Under his proposal, individuals earning between Rs100,000 and Rs500,000 per month should pay a flat tax rate of 5 percent. Monthly incomes ranging from Rs500,000 to Rs1.5 million should be taxed at 10 percent, while incomes above Rs1.5 million per month should face a 20 percent tax rate. He argued that such a framework would significantly increase disposable incomes, encourage spending and support broader economic expansion without undermining revenue generation.
Business community welcomes export incentives in budget
Representatives of the business and export sectors have welcomed several measures announced in the federal budget 2026-27, including allocations for housing, export financing, development projects, and education, while expressing concerns over the ambitious tax collection target and the absence of relief in energy prices. FPCCI Senior Vice President Saquib Fayyaz Magoon said the government’s tax revenue target of Rs. 15.2 trillion appears difficult to achieve under prevailing economic conditions, which may require a broader strategy to expand the tax base and stimulate economic growth.
He praised the allocation of Rs 71 billion for the Prime Minister’s Apna Ghar Housing Scheme and the construction sector, describing it as a positive step toward addressing the country’s housing needs and supporting economic activity in allied industries. He also welcomed the allocation of Rs. 88 billion under the Export Refinance Scheme that would help exporters improve liquidity and competitiveness in international markets. He further appreciated the increase in development spending and higher allocations for the education sector, saying such investments are essential for long-term economic growth and human capital development.
Commenting on taxation measures, he noted that while the government did not completely abolish the Super Tax, it had provided partial relief, addressing one of the key concerns raised by the business community. However, he expressed disappointment over the government’s decision not to introduce a fixed tax regime, a long-standing demand aimed at providing greater certainty and ease of compliance for export-oriented businesses.
Babar Khan, Chairman Pakistan Hosiery Manufacturers and Exporters Association, said the finance bill should also include the proposal of the businessmen community to reduce the cost of doing business for exporters in order to enhance their competitiveness in global markets. In this regard, the exporters demand to set 1% tax as Final Tax Regime (FTR) should be considered and allocation for the Export Facilitation Scheme should be made, he further said. He emphasized that the government should include a reduction in energy prices to lower the cost of doing business and improve industrial competitiveness.
Ibrahim Amin, Chairman of TriStar International Consultants, appreciated the government’s decision to allocate Rs. 54 billion for the construction of 150,000 low-cost housing units under the Sustainable Urban Development Program. He said the proposal to develop digital master plans for 10 cities is a forward-looking initiative that will discourage unplanned expansion of housing societies and promote sustainable urban growth supported by modern infrastructure and public amenities.
Amin further observed that the ongoing geopolitical tensions and military conflict in the Middle East have created an opportunity for both resident and overseas Pakistanis to invest their savings in Pakistan’s real estate market. “In this context, the government’s proposal to encourage higher-value remittances into the country is likely to benefit the real estate sector and strengthen investment flows,” he said. He also called on the government to accelerate the digitization of land records in major cities, introduce transparent and computerized property transaction systems, and establish an effective regulatory or vigilance mechanism to protect property owners from land grabbing and fraudulent activities.
Stakeholders also welcomed the abolition of the 5 percent deduction on debit card transactions, saying the move would encourage greater use of formal banking channels and support the documentation of the economy.
