The Senate of Pakistan on Thursday approved a comprehensive set of recommendations for the budget 2026-27, featuring a 15% increase in federal government employees' salaries, restoration of frozen medical allowances for employees and pensioners, higher taxes on luxury assets and large-engine vehicles, and permission for foreign visitors and residents to bring alcohol for personal use. The recommendations were adopted during a Senate session chaired by Chairman Senate Yousaf Raza Gillani, following the presentation of the committee's report by Senate Standing Committee on Finance Chairman Saleem Mandviwalla.
Key Financial Measures
The Senate proposed a 15% salary increase for federal government employees and the restoration of frozen medical allowances for both serving employees and pensioners. It also recommended reducing tax rates for salaried and low-income individuals to provide relief amid rising living costs. The house proposed a reduction in General Sales Tax (GST) on food items, medicines, educational supplies, and agricultural inputs, while recommending allocation of funds to reduce electricity tariffs.
Alcohol and Agriculture Provisions
In a notable recommendation, the Senate suggested allowing foreign residents and visitors to bring alcohol for their personal consumption. The recommendations also called for zero-rating taxes and duties on fertilizers, seeds, pesticides, diesel, and agricultural machinery to support the agriculture sector.
Public Services and Fiscal Reforms
The Senate further proposed increasing allocations for public hospitals, primary healthcare services, higher education funds, and scholarship programs. The report urged the government to reduce non-development expenditures, simplify the tax regime for small and medium-sized enterprises, review proposed tax measures on essential commodities and the salaried class, and expand the overall tax base.
Energy and IT Sector Relief
The Senate also recommended withdrawal of additional charges and taxes imposed through electricity bills on domestic and low-income consumers. It proposed extending tax exemptions available to IT exporters and freelancers for another 10 years.
Revenue Generation Measures
To broaden revenue generation, the recommendations included increasing taxes on vehicles with engine capacities above 3,000cc, luxury properties, and non-productive assets. The Senate also called for reducing indirect taxes on essential goods and establishing a mechanism for transferring development funds to elected local governments. The house further recommended comprehensive taxation and documentation measures for luxury retail businesses, real estate transactions, and luxury transactions undertaken by non-filers.
Property Taxation
Regarding property taxation, the Senate proposed that lower property tax rates should remain available only to first-time homebuyers, while property taxes should continue to apply to investors purchasing second homes or holding plots for investment purposes.
Finance Minister's Address
Wrapping up the budget debate, Finance Minister Muhammad Aurangzeb said the government had not been able to achieve its GDP growth target due to global and regional economic conditions. However, he said reform measures across various sectors had continued. The minister told the house that advance tax on the export sector had been abolished, various markup rates had been reduced, and tax relief had been provided to the construction sector. He said no new taxes had been imposed on the IT sector, while measures were being taken to create a better ecosystem and training opportunities for freelancers.
Aurangzeb said the government had facilitated small farmers through easier access to loans, allocated Rs10 billion under the Youth Loan Scheme, and abolished taxes on the import of agricultural machinery. He said a simplified scheme was being introduced to bring small shopkeepers into the tax net. At the same time, the Federal Board of Revenue (FBR) was being digitized to reduce human intervention and improve institutional efficiency. The finance minister said the government was taking measures to move the economy towards self-reliance and had demonstrated its ability to cope with flood-related challenges through its own resources.
Committee Chairman's Remarks
Speaking on the occasion, Mandviwalla said that this was the eighth consecutive budget for which he was presenting Senate recommendations as chairman of the finance committee. He said the budget had been presented in a war-like situation and noted that relief had been provided to salaried individuals through reductions in income tax slabs. He also called for additional measures to promote solar energy and proposed abolishing taxes on credit and ATM cards.
Mandviwalla said the finance committee had submitted 108 recommendations on the budget, while the Senate Standing Committee on Planning had submitted 15 recommendations, bringing the total number of Senate recommendations to 123. He observed that allocations for health and education remained very low and said additional burdens had been placed on existing taxpayers. He reiterated the committee's recommendations for a minimum 15% increase in government employees' salaries, lower taxes on food items and agriculture, and tax exemptions for books, notebooks, and pencils. He also said climate-related levies should be used solely for environmental improvement measures.
Chairman Senate's Conclusion
Senate Chairman Gillani said the house had held detailed discussions on the budget for four consecutive days, with 56 senators taking part in the debate. He said the finance and planning committees had worked continuously to prepare 123 recommendations on the budget, which would now be forwarded to the National Assembly for consideration. Following completion of the proceedings, the Senate session was adjourned for an indefinite period.
