Govt Refuses to Publicly Share Exact Cost of Tax Relief in Budget 2026-27

The government on Monday declined to publicly disclose the exact revenue impact of tax relief measures proposed in the Finance Bill 2026-27, saying the budget package remained under discussion with the International Monetary Fund (IMF).

However, during proceedings of the National Assembly Standing Committee on Finance, officials from the Ministry of Finance and the Federal Board of Revenue (FBR) shared the figures privately with committee chairman Syed Naveed Qamar while the parliamentary panel scrutinised the budget.

According to official estimates discussed during the meeting, the cumulative revenue impact of relief measures for higher-salaried individuals, the abolition and phased reduction of super tax, and cuts in tax rates for exporters and real estate transactions is close to Rs. 360 billion in the next fiscal year.

Pakistan Peoples Party lawmakers Sharmila Faruqui and Hina Rabbani Khar pressed the government to disclose the exact amount publicly and asked whether the figure stood at Rs. 360 billion. The committee chairman responded that the number appeared to be close to the estimate shared with him, but said the government was unwilling to disclose it openly while the media was covering the proceedings.

During the meeting, FBR member Dr Hamid Ateeq Sarwar told the committee that the Finance Bill 2026-27 contained 11 relief measures, 10 rationalisation measures and five administrative reforms. He said the precise revenue effect of the relief proposals could not yet be fully ascertained.

Citing last year’s budget, he said the FBR had provided tax relief of Rs. 50 billion to the salaried class, but tax collection from the segment had still risen to Rs. 625 billion.

Hina Rabbani Khar strongly criticised the advance income tax on exporters, describing it as a form of extortion that offered no incentive for innovation or research.

On the proposed fixed tax scheme for retailers, FBR officials said the government aimed to persuade 3.5 million small shopkeepers to enter the tax net. Dr Ateeq told lawmakers that the initial target was around 100,000 retailers, each contributing at least Rs. 25,000 under the scheme.

He said those availing the scheme would generally not face audits unless major discrepancies were detected, such as ownership of luxury vehicles or plots in Defence Housing Authority.

On the super tax, he said the impact on higher-income earners with income exceeding Rs. 500 million would amount to Rs. 400 billion.

Separately, the Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla, also continued its deliberations on the budget at Parliament House.

During the meeting, Finance Minister Muhammad Aurangzeb opposed a proposal by senators to impose a 1 per cent advance tax on exporters under the final tax regime. He said exporters needed to shift their business model towards innovation and research to fully realise the country’s export potential.

The minister said factors such as the rice situation and the blockade of the Afghan border had contributed to a decline in exports, but maintained that the budget had set the economy on the path towards export-led growth.

The Senate committee also examined proposals relating to tax collection in the steel sector, including options linked to electricity consumption data. It reviewed measures aimed at broadening the tax base, improving documentation and facilitating faster refund processing.

FBR officials told the committee that approximately Rs. 55 billion in refunds were being processed every month and briefed members on efforts to further streamline the refund mechanism.

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 proceeds payable upon death, disability-related benefits and policies maturing after seven years will continue to remain exempt under the proposed framework.

It also endorsed the continuation of sales tax exemptions on property settlements following the death of parents. Members were informed that no sales tax would apply to property division or valuation adjustments carried out as part of inheritance settlements.

In discussions on the digital economy, the committee reviewed proposals on the taxation of income generated through social media and online platforms. Members stressed the need to encourage digital entrepreneurship, facilitate foreign exchange inflows and ensure an equitable taxation regime for emerging sectors. The committee subsequently approved a proposal for a 5pc withholding tax on social media income.

The panel also reviewed issues relating to data integration, documentation of the economy and expansion of the tax base. The FBR informed senators that efforts were under way to strengthen coordination with the State Bank of Pakistan to improve the use of financial data for tax compliance.

Lawmakers were told that data analysis had identified around 8,697 individuals holding deposits of approximately Rs. 750 billion who had not paid income tax, underlining the need to widen the tax net and improve compliance.

Committee members also expressed concern over the FBR’s performance and its repeated policy shifts over the years. Senator Mandviwalla said the tax machinery had carried out numerous experiments over the past decade without producing lasting results.

During the discussion, the committee also alleged that a case involving Rs. 1.5 billion had surfaced and accused the Engineering Development Board of misusing its authority. Senators demanded the resignation of the industry secretary and warned that the matter could lead to serious legal consequences.