ISLAMABAD:
The Senate on Thursday approved a series of 2026-27 budget recommendations, including a 15% increase in government employee salaries, reinstating frozen medical benefits for employees and retirees, higher taxes on luxury assets and large-engine vehicles, and allowing foreign visitors and residents to bring alcohol into the country for their personal use.
The recommendations were adopted in a Senate session chaired by Senate President Yousaf Raza Gillani after Standing Committee on Finance Chairman Saleem Mandviwalla presented the committee’s report on the Finance Bill.
Among the key recommendations, the Senate proposed increasing federal government employee salaries by 15 percent and reinstating frozen medical benefits for both active and retired employees. He also recommended reducing tax rates for earners and low-income earners to ease the rising cost of living.
The House proposed a reduction in the General Sales Tax (GST) on food items, medicines, school supplies and agricultural inputs, while recommending allocation of funds to reduce electricity rates. In one notable recommendation, the Senate suggested allowing foreign residents and visitors to bring alcohol for personal consumption.
The recommendations also call for zero taxes and duties on fertilizers, seeds, pesticides, diesel and agricultural machinery to support the agricultural sector. The Senate further proposed increasing allocations to public hospitals, primary health care services, higher education funds and scholarship programs.
The report urges the government to reduce non-development spending, simplify the tax regime for small and medium-sized businesses, review proposed tax measures on essential products and the salaried class, and broaden the overall tax base.
The Senate also recommended removing additional fees and taxes imposed through electricity bills on domestic and low-income consumers. He proposes to extend the tax exemptions granted to IT exporters and self-employed people for another 10 years.
To expand revenue generation, recommendations included increased taxes on vehicles with engine capacity above 3,000 cc, 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 tax and documentation measures for luxury retail businesses, real estate transactions and luxury transactions undertaken by non-filers.
Regarding property taxes, the Senate proposed that lower property tax rates remain available only to first-time home buyers, while property taxes should continue to apply to investors purchasing second homes or holding land for investment purposes.
Concluding 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 in various sectors had continued.
The minister told the House that advance tax on the export sector had been abolished, various mark-up rates had been reduced and tax concessions had been given to the construction sector.
He said no new taxes had been imposed on the IT sector, while steps were being taken to create a better ecosystem and training opportunities for freelancers.
Aurangzeb said the government had made it easier for small farmers to access loans, allocated Rs 10 billion under the youth loan scheme and abolished taxes on import of agricultural machinery.
He said a simplified system was being introduced to bring small traders into the tax net. At the same time, the Federal Board of Revenue (FBR) was being digitalized to reduce human intervention and improve institutional efficiency.
The Finance Minister said the government was taking steps to bring the economy to self-reliance and had demonstrated its ability to deal with flood-related challenges through its own resources.
Speaking on the occasion, Mandviwalla said this was the eighth consecutive budget for which he was presenting recommendations to the Senate as chairman of the finance committee.
He said the budget was presented in a war situation and noted that relief had been provided to employees through reductions in income tax brackets. He also called for additional measures to promote solar energy and proposed abolishing taxes on credit cards and ATM cards.
Mandviwalla said the finance committee submitted 108 recommendations on the budget, while the Senate standing committee on planning 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 imposed on existing taxpayers. He reiterated the committee’s recommendations for a minimum 15% increase in civil servants’ salaries, lower taxes on food and agricultural products and tax exemptions for books, notebooks and pencils.
He also said climate-related levies should be used only for environmental improvement measures.
Senate President Gillani said the House 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 tirelessly to prepare 123 recommendations on the budget, which would now be forwarded to the National Assembly for consideration.
Once the work was completed, the Senate session was adjourned indefinitely.
