ISLAMABAD: The government has refused to publicly share the exact figures of tax relief provided to various sectors in the Finance Bill 2026-27, arguing that parleys with the International Monetary Fund (IMF) continue to lock the budget measures.
The tax relief doled out for the higher salaried class, abolition and gradual reduction in super tax, and slashing of tax rates for exporters and real estate transactions, in totality, will have a revenue impact of approximately Rs360 billion for the next fiscal year.
When MNAs Sharmila Sahiba Faruqui and Hina Rabbani Khar, belonging to the PPP, insisted on sharing the exact revenue impact and inquired whether it stood at Rs360 billion, the National Assembly Committee on Finance chairman said that it seemed quite close to the figure shared by the government with him on the pretext that it would not be shared publicly when the media is covering the proceedings of the committee.
However, the Ministry of Finance and the Federal Board of Revenue (FBR) shared tax relief figures with the exact revenue impact with panel chairman Syed Naveed Qamar, during the scrutiny of the budget process undertaken by the parliamentary panel on Monday.
MNA Hina Rabbani Khar sternly opposed advance income tax on exporters and argued that it was one kind of extortion where there was no incentive for innovation and research. FBR Member Dr Hamid Ateeq Sarwar briefed the committee that the Finance Bill 2026-27 comprised 11 relief measures, 10 rationalisation measures and five administrative reforms. He said that the relief measures with exact revenue impact could not be ascertained. Citing an example, he said that the FBR provided Rs50 billion tax relief to the salaried class in the last budget, but tax collection went up to Rs625 billion to date.
Regarding the retailers’ fixed scheme, FBR officials said that the government would persuade 3.5 million small shopkeepers to look into the matter and lure them into the tax net.
“We will target almost 100,000 retailers to contribute at least Rs25,000 to avail this scheme,” FBR Member Ateeq said, adding that there would be no audit unless a massive discrepancy was found, such as having luxury vehicles and plots in the Defence Housing Authority.
He said that the government would target 100,000 small retailers in the first stage. On the super tax, he said that higher income earners exceeding Rs500 million would have an impact of Rs400 billion.
Earlier, the Senate Standing Committee on Finance and Revenue held its deliberation under the chairmanship of Senator Saleem Mandviwalla at the Parliament House. Minister for Finance Muhammad Aurangzeb opposed the senator’s recommendation to slap 1 percent advance tax on exporters under the final tax regime. The minister said that exporters would have to change their business model to incorporate innovation and research to realise the true potential of exports. He said that the rice situation and blockade of the Afghan border resulted in a decline in exports. He said that the government moved towards export-led growth in the budget by setting the direction of travel of the economy on the right track.
Members also considered proposals relating to tax collection mechanisms in the steel sector, including options linked to electricity consumption data. The committee reviewed measures aimed at broadening the tax base, improving documentation, and facilitating the efficient processing of refunds.
FBR officials informed the Senate committee that approximately Rs55 billion in refunds are processed every month and briefed members on efforts to further streamline the refund system.
The committee approved a proposal to tax the profit component of life insurance policies from Tax Year 2026. The principal amount will remain exempt from taxation. Insurance proceeds payable upon death, disability-related insurance benefits and policies maturing after seven years will continue to enjoy tax exemption under the proposed framework.
The committee 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.
During discussions on the digital economy, members reviewed proposals concerning the taxation of income generated through social media and online platforms. The committee emphasised the importance of encouraging digital entrepreneurship, facilitating foreign exchange inflows, and ensuring an equitable taxation framework for emerging sectors of the economy. The committee subsequently approved a proposal for a five percent withholding tax on social media income.
The committee also reviewed matters relating to data integration, documentation of the economy, and expansion of the tax base. The FBR informed members that efforts are underway to enhance coordination with the State Bank of Pakistan to improve the use of financial data for tax compliance purposes. Members were briefed on proposals concerning transaction monitoring and measures intended to strengthen documentation across various segments of the economy.
The committee was further informed that data analysis had identified approximately 8,697 individuals with deposits amounting to approximately Rs750 billion who had not contributed income tax, highlighting the importance of expanding the tax net and improving compliance.
Committee members raised concerns about the FBR’s performance and its frequent policy changes over the years. Mandviwalla said the FBR had conducted numerous experiments during the past decade but failed to achieve lasting results.
The committee alleged that a case involving Rs1.5 billion had emerged and accused the Engineering Development Board (EDB) of misusing its powers. Senators demanded the resignation of the industry secretary and warned that the matter could lead to serious legal consequences. “This is a straightforward case that could result in handcuffs,” they added.
