The government has refused to publicly disclose the exact revenue impact of the tax relief measures proposed in the Finance Bill 2026-27, citing ongoing discussions with the International Monetary Fund (IMF).
The issue came up during a meeting of the National Assembly Standing Committee on Finance, where officials from the Ministry of Finance and the Federal Board of Revenue (FBR) privately shared the figures with committee chairman Syed Naveed Qamar while lawmakers reviewed the budget proposals.
According to estimates discussed during the session, the combined cost of tax relief measures—including concessions for salaried individuals, the phased reduction of super tax, and lower tax rates for exporters and real estate transactions—is expected to be close to Rs. 360 billion in the next fiscal year.
PPP lawmakers Sharmila Faruqui and Hina Rabbani Khar pressed officials to publicly disclose the exact amount, questioning whether the figure stood at Rs. 360 billion. While Qamar acknowledged that the estimate appeared accurate, he noted that the government was reluctant to reveal the details during a televised proceeding.
FBR Member Dr. Hamid Ateeq Sarwar informed the committee that the Finance Bill 2026-27 includes 11 relief measures, 10 rationalisation initiatives, and five administrative reforms, adding that the precise revenue impact is still being assessed.
Referring to the previous budget, Dr. Ateeq noted that despite granting Rs. 50 billion in tax relief to salaried individuals last year, tax collections from the segment increased significantly to Rs. 625 billion.
Hina Rabbani Khar also criticised the advance income tax imposed on exporters, calling it a burden that discourages innovation and research-driven growth.
On the proposed fixed tax regime for retailers, FBR officials said the government aims to bring 3.5 million small traders into the formal tax net. The initial phase targets around 100,000 retailers, each expected to contribute at least Rs. 25,000 under the scheme.
Officials clarified that businesses opting into the scheme would generally not be subjected to audits unless major discrepancies emerged, such as ownership of luxury vehicles or high-value properties inconsistent with declared income.
Discussing the super tax, Dr. Ateeq said the levy currently generates around Rs. 400 billion from individuals and entities earning more than Rs. 500 million annually.
Separately, the Senate Standing Committee on Finance and Revenue continued its review of the budget proposals. Finance Minister Muhammad Aurangzeb opposed suggestions to impose a 1% advance tax on exporters operating under the final tax regime, arguing that Pakistan’s export sector must evolve through innovation and value addition.
He acknowledged that factors such as disruptions in rice exports and the closure of the Afghan border had affected trade performance but maintained that the government’s broader economic strategy remains focused on achieving export-led growth.
The Senate panel also examined proposals related to the steel industry, tax documentation, and broadening the tax base. FBR officials informed lawmakers that approximately Rs. 55 billion in refunds are currently being processed each month, with efforts underway to further improve the refund system.
Among other decisions, the committee approved a proposal to tax the profit component of life insurance policies from tax year 2026, while keeping the principal amount exempt. Insurance payouts in cases of death, disability, and policies maturing after seven years will continue to enjoy tax exemptions.
Lawmakers also endorsed the continuation of sales tax exemptions on inheritance-related property settlements, ensuring that property transfers and valuation adjustments following the death of parents remain tax-free.
In discussions on the digital economy, senators approved a proposal to impose a 5% withholding tax on income earned through social media and online platforms, while stressing the importance of supporting digital entrepreneurship and encouraging foreign exchange inflows.
The FBR further revealed that data analysis had identified 8,697 individuals holding bank deposits worth approximately Rs. 750 billion who had not paid income tax, highlighting the government’s efforts to expand the tax net and improve compliance.
Committee members voiced concerns over the FBR’s performance and frequent policy changes. Senate Standing Committee Chairman Saleem Mandviwalla remarked that repeated experiments within the tax system over the past decade had failed to deliver sustainable outcomes.
The meeting also touched on allegations of financial irregularities involving approximately Rs. 1.5 billion linked to the Engineering Development Board. Senators demanded accountability and warned that the matter could have serious legal implications.
