Islamabad:
The Minister of Finance, Muhammad Aurangzeb, unveiled on Tuesday an RS17.6 billion budget, which attempted to limit budgetary expansion, but the tax measures were clearly self-contracting which, on the one hand, would promote the cash economy and fossil fuels, but also discourage them from the other.
The government of Prime Minister Shehbaz Sharif has also introduced new taxes on the digital economy, retirees and clean energy. Some of these measures were contradictory with the policy declared to discourage the cash economy.
However, the 2025-26 financial bill also gave clean energy incentives by taxing internal combustion motor cars and fossil fuels.
Despite high poverty and high unemployment rate, the government has proposed to considerably reduce the import rights of raw materials to finished products, which, according to the industry, led to the deindustrialisation of Pakistan.
The economy was opened for foreign competition by reducing protection available to local industries. The Minister of Finance said that the maximum customs task slab had been reduced to 15% while a five -year plan had been given to abolish additional and regulatory tasks.
The inaudible budgetary discourse, which in therangzeb, pronounced in the middle of the rowdy opposition, clearly failed to give a political orientation.
While the finance division has tried to meet the requirement of the International Monetary Fund (IMF) to achieve the tax objectives, the Federal Board of Return (FBR) could not propose the clear tax policy.
The 2025-26 financial bill seemed to be the most confusing document that any government has produced for years. It revolved around the pursuit of the young people’s economy and the 21st century business practices.
The government proposed an 18% sales tax on the import of solar panels, but it imposed RS2.5 by liter carbon liy on the use of petrol, diesel and furnace oil, showing the lack of clarity on the part of the government.
Similarly, it increased tax withdrawals of banks from 0.6% to 0.8% to discourage the cash saving and generate more easy money, but it also imposed a new tax on digital service platforms from 0.25% to 5%.
The government has also increased the sales tax over 850 CC in middle class cars from 12.5% to 18%. A new tax has been introduced on retirees where the monthly pension of RS833,000 was imposed at the rate of 5%.
The FBR lacked once again in determining the policy, that the government wants to promote the digital economy or the cash economy. The president of the FBR, Rashid Langrial, canceled the media conference on the 2025-26 financial bill, which compromises transparency and the right of the people to know the measures that have an impact on their future.
In his discourse on the budget, the Minister of Finance has surprisingly declared that “rapid growth in online trade and digital markets created problems for traditional companies, therefore, it is proposed that electronic commercial platforms, couriers and logistics services are taxed at the rate of 18%.
A tax manager told L’Express Tribune that the FBR would earn 64 billion rupees by taxing the digital economy. The 2025-26 financial bill has shown that economic managers preferred the 19th century economy by bringing a certain relief on the purchase of properties but imposed on the 21st century digital platforms.
He also proposed to prohibit economic transactions from non -eligible people, in particular the prohibition on the purchase of properties, cars and investment in securities by people whose assets do not correspond to these purchases.
Thanks to the finance bill, the government has also changed a multitude of other non -tax laws in addition to introducing two new laws, the 2025 law on digital presence products and the new law on the adoption of energy vehicles, 2025. There may be constitutional issues, if new laws can be introduced by the financial bill.
The government has proposed a total of more than 415 billion rupees of tax measures in the budget, said the senior tax manager. These include 292 billion rupees of measures related to the FBR, RS111 billion additional profits by imposing 2.5 rupees per carbon line on petrol, diesel and furnace oil and 9 billion diverting rupees on conventional cars.
The Minister of Finance Aurangzeb said that the IMF also accepted the implementing measures of 389 billion rupees. But he admitted that the FBR tax / GDP ratio would remain lower than the IMF target of 10.6% during this financial year.
The Government proposed these measures to extract a minimum of 2.2 billions of rupees from the slow economy in order to achieve the tax objective of RS14.13 Billion of rupees. The objective of oil and carbon sample has been set at Rs1,47 Billions for the next exercise at the rear of RS80 by liter fee.
The Minister of Finance also announced a respite for employees of lower income groups. He said that on the annual income of RS1.2 million, the tax rate will be 2.5%, down compared to 5%.
At the meeting of the cabinet earlier, there was an exchange of words between the Minister of Finance and the Minister of Communication Abdul Alaem Khan, who had asked the Prime Minister to further increase the wages of government employees.
The Minister of Finance said that this would require additional resources, which encouraged Khan to say that he was not a street seller, who did not know that it required additional money, said a member of the cabinet under the cover of anonymity.
The Prime Minister decided that to give a 10% increase in wages, the tax rate for the lower average income group should have increased from 1% to 2.5% proposed, sources said.
On an annual income of up to 2.2 million rupees, the government proposed reducing the rate by 15% to 11%, on an annual income of 3.2 million rupees, the rate is reduced from 25% to 23%. There is no relief for annual salaried income of more than 4.1 million rupees. However, the fine on the most income of income increased from 10% to only 9%, which the Minister of Finance called was necessary to stop the “brain flight”.
Anticipated tax for sale or transfer of real estate increased from 3% to 4.5% over the value of 50 million RS. The rate is motivated up to 5% against 3% on funds of 100 million rupees, while it is further increased to 5.5% against 4%, if the value exceeds 100 million rupees.
However, when purchasing ownership, the rate is reduced from 3% to 1.5%, from 3.5% to 2% and from 4% to 2.5%, depending on the value of the property. Economic transactions for ineligible people have been prohibited, if the value of new purchases is greater than 130% of the value of total assets.
Tight tax path
In order to stay in the IMF program, the government has proposed a financially tight budget, although it has also created room for political expenses. The government has proposed a budget deficit of 6.5 billions of rupees or 5% of the size of the economy.
The total budget size is RS17.6 Billions, or 7.3% lower than the initial budget of this year due to allowances relative to interest payments during the year 2025-26.
The proposed budget deficit is 1.8% of GDP or 2.4 billions of rupees less than the initial estimates of this exercise. The deficit can always appear in absolute terms. But it is, for the first time, lower than the gap of this year, both in terms of the size of the economy and in absolute number.
The defense budget was offered at Rs 2.55 Billions, or 21% or 436 billion rupees higher than this exercise due to the war with India. The development program of the armed forces was marginally increased to 300 billion rupees, which is much lower than the soldiers had demanded.
The government provides for raw federal income to an RS19.3 Billion record for the next year, greater than 1.5 billion of rupees.
Grute income is based on the tax objective of the FBR of RS14.13 Billions and 5.2 billions of non -tax income. Non -tax income will mainly come from the oil tax where the government wishes to receive nearly 1.5 billion of rupees and the benefit of 2.4 billions of rupees by the Pakistan State Bank.
On the tax collections of RS14.1 Billion de RS, the provinces will receive 8.2 billions of rupees as actions in federal taxes under the reward of the National Finance Commission (NFC).
This leaves the federal government net revenues of 11 billions of rupees for the next fiscal year, which will not be enough to respond to interest payments and inclusive of all defense expenses. The government will borrow 6.5 billions of rupees during the next financial year to finance the total federal budget of 17.6 rumors of rupees.
As part of the IMF program, the four provinces are also required to save 1.46 billion of rupees of their income as surplus in cash to reduce the national budget deficit to RS5 Billion or 3.9% of GDP. It is a stronger budgetary consolidation and would force the five governments to achieve all their income and expenses related to the objectives.
Interest payments will eat 47% of the budget and the federal government’s net income – after payment of provincial shares – will be of 2.8 more than interest payments. Interest payments of the following year are estimated at RS8.2 Billions, which is lower than this exercise due to a substantial reduction in interest rates.
The Minister of Finance announced a BISP program of 716 billion rupees aimed at extending the net to more than 10 million beneficiaries and adding more children in the transfer programs in conditional cash.