Public Gazette
Islamabad: The government has declined to disclose the exact amount of tax relief given to different sectors in the Finance Bill 2026–27, saying that discussions with the IMF are still ongoing and the budget measures are not yet finalised.
The tax relief provided to high-income earners, along with the abolition and gradual reduction of super tax and cuts in tax rates for exporters and real estate transactions, is estimated to reduce government revenue by around Rs360 billion in the next fiscal year.
During a National Assembly Finance Committee meeting, PPP lawmakers Sharmila Sahiba Faruqui and Hina Rabbani Khar pressed for the exact figures and asked whether the impact matched Rs360 billion. The committee chairman indicated that the figure shared privately with him by the government was indeed close to that amount, though it was not meant for public disclosure while media was present.
However, the Ministry of Finance and the Federal Board of Revenue (FBR) did provide detailed tax relief data, including the exact revenue impact, to committee chairman Syed Naveed Qamar during the budget scrutiny session held on Monday.
MNA Hina Rabbani Khar strongly opposed the advance income tax on exporters, calling it a form of “extortion” that discourages innovation and research.
Meanwhile, FBR Member Dr Hamid Ateeq Sarwar informed the committee that the Finance Bill 2026–27 includes 11 relief measures, 10 rationalisation steps, and 5 administrative reforms. He added that the exact revenue impact of some relief measures cannot be precisely calculated, noting that although the FBR offered Rs50 billion in relief to the salaried class in the previous budget, overall tax collection had still risen to Rs625 billion to date.
On the retailers’ fixed tax scheme, officials said the government plans to bring around 3.5 million small shopkeepers into the tax net. In the first phase, about 100,000 retailers will be targeted, each expected to contribute at least Rs25,000 under the scheme, with minimal audits unless major discrepancies—such as ownership of luxury vehicles or DHA properties—are detected.
Regarding the super tax, officials said it would mainly affect high-income earners above Rs500 million, with an estimated revenue impact of around Rs400 billion.
The Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla at Parliament House, held detailed discussions on proposed budget measures. Finance Minister Muhammad Aurangzeb opposed a suggestion to impose a 1% advance tax on exporters under the final tax regime, arguing that exporters would need to modernise their business models by investing in innovation and research to unlock the true potential of exports. He also noted that factors such as the rice situation and disruptions at the Afghan border had contributed to a decline in exports, adding that the government is steering the economy towards export-led growth.
The committee also reviewed proposals related to improving tax collection in the steel sector, including mechanisms linked to electricity consumption data. Broader reforms were discussed to expand the tax base, enhance documentation, and speed up refund processing.
FBR officials informed the committee that around Rs55 billion in tax refunds are processed each month and said efforts are underway to further streamline the refund system.
In addition, the committee approved taxing the profit portion of life insurance policies starting from Tax Year 2026, while keeping the principal amount exempt. Insurance payouts due to death or disability, as well as policies maturing after seven years, will remain tax-free under the proposed rules.
The committee also approved continuing the sales tax exemption on property transfers made after the death of parents. Members were informed that no sales tax would be applied to property division or valuation adjustments carried out as part of inheritance settlements.
During discussions on the digital economy, lawmakers examined proposals to tax income earned through social media and online platforms. While stressing the need to support digital entrepreneurship and encourage foreign exchange inflows, the committee approved a 5% withholding tax on social media earnings.
The committee also reviewed broader reforms related to data integration, economic documentation, and expanding the tax base. The FBR informed members that it is working with the State Bank of Pakistan to better use financial data for improving tax compliance, including monitoring transactions across different sectors.
Officials further revealed that data analysis had identified around 8,697 individuals holding deposits worth approximately Rs750 billion who have not filed income tax returns, underscoring gaps in tax compliance.
Members expressed concern over the FBR’s performance and repeated policy changes over the years. Senator Saleem Mandviwalla remarked that the FBR had experimented with multiple reforms over the past decade without achieving stable, lasting results.
Separately, the committee raised serious concerns over an alleged Rs1.5 billion case involving the Engineering Development Board (EDB), accusing it of misuse of authority. Senators called for the resignation of the industry secretary and warned of possible legal consequences, describing the matter as potentially leading to strict action.
