Finance Secretary Says Any Relief Must Be Offset By Equal Amount Of Additional Revenue And Enforcement Actions
ISLAMABAD:
The government on Monday refused to share the cost of the tax break with the National Assembly’s standing committee on finance, which will approve the new budget, but the committee chairman said the package would cost around 360 billion rupees.
“The government is in discussions with the International Monetary Fund (IMF) and therefore cannot disclose these figures,” Finance Secretary Imdadullah Bosal said while responding to a question asked by MP Jawed Hanif Khan.
Bosal added that any relief must be offset by an equal amount of additional revenue and enforcement measures, a statement that is consistent with the agreement with the IMF. However, he maintained that the government had privately shared the relief costs with the standing committee chairman.
When MP Muhammad Javed Hanif Khan asked if the relief cost was Rs 360 billion, standing committee chairman Syed Naveed Qamar replied that “you were very close”. Later, he said the cost was around Rs 360 billion.
The Express PK Press Club had reported that the government had given Rs 360 billion in tax relief, including Rs 115 billion for the real estate sector and Rs 52 billion for the salaried class.
The Finance Ministry had informed the federal cabinet that the cost of reducing withholding taxes for the real estate sector was Rs115 billion.
The sources said the government was still in talks with the IMF, which was not very comfortable about halving tax rates on sale and purchase of properties.
It was unprofessional of the government not to share the relief costs with lawmakers, pointed out Hina Rabbani Khar, MP and member of the standing committee.
The cabinet was further informed that the impact of reducing federal excise rates on air tickets was Rs 24 billion and the Rs 17 billion was the cost of lowering withholding tax rates on international debit and credit card transactions to 0.5 per cent.
Bilal Kayani, the minister of state for finance, said people were getting around hefty taxes on business class airline tickets by upgrading their tickets after boarding the flight or booking from abroad.
According to the government’s briefing to the cabinet last week, the abolition of the 1% capital value tax on foreign transactions cost around Rs 7 billion.
Hamid Ateeq Sarwar, FBR member for strategic transformation, said the capital value tax should be abolished on the demand of foreign countries and also because Pakistanis were becoming non-resident persons to avoid the tax.
Qamar questioned whether the anticipated revenue losses had been properly quantified and requested details of the government’s strategy to offset any resulting budget shortfall.
The committee also deliberated on relief for wage earners amid persistent inflation and rising cost of living, and sought clarification on whether the proposed revisions to the tax schedule would provide meaningful relief to middle-income groups.
Kayani said maximum possible relief had been extended to employees.
The President observed that tax relief measures must remain equitable and economically justified, while emphasizing the need to broaden the tax base and improve compliance. He asked the Finance Ministry and the FBR to submit detailed revenue estimates, fiscal impact assessments and implementation plans before further consideration of the Finance Bill 2026.
Hamid Sarwar informed the committee that the government has also decided to remove the requirement of advance payment of income tax for exporters. He said the move would help address liquidity issues.
To another question, the Strategic Transformation member added that the government collected around Rs 400 billion annually through super tax, which it could not abolish immediately. The super tax was introduced as an emergency measure many years ago. The government has proposed in the budget to abolish the super tax on annual income of Rs 500 million and impose a rate of 8% on higher income earners.
However, the super tax rate will be 10% for banks, oil and gas exploration companies and fertilizer companies.
Hamid Ateeq said banks’ loans to the government increased to 80 percent of their total loans after the removal of advances-to-deposits ratio limits. Violation of these limits attracted additional taxes, which the government has ended and, as a result, there is virtually no money available for private sector borrowers.
The committee was informed that the fiscal package includes eleven relief measures, ten rationalization measures and five administrative reforms aimed at promoting economic growth, encouraging investments, improving documentation of the economy, improving tax compliance and strengthening revenue collection.
Kayani said the government had abolished the 18% sales tax on the shipping industry in light of lessons learned from the Middle East conflict. He said there was a need to develop the local maritime industry.
Qamar was of the view that the tax was abolished after the National Logistic Cell took over the Pakistan National Shipping Corporation.
The committee was informed that the aid package includes the removal of taxes on contraceptives and certain products intended for women.
Calling taxes on sanitary products a “pink tax” was ridiculous, MP Sharmila Faruqui said.
