The Finance Minister says any relief must be offset by an equal amount of additional revenue and enforcement measures
ISLAMABAD:
The government on Monday refused to share the cost of the tax relief package with the National Assembly’s standing committee on finance, which will approve the new budget, but the committee chairman said the package would cost about Rs360 billion.
“The government is in discussions with the International Monetary Fund (IMF) and hence cannot disclose these figures,” Finance Minister Imdadullah Bosal said while responding to a question raised by MNA Jawed Hanif Khan.
Bosal went on to say that any relief must be offset by an equal amount of additional revenue and enforcement measures, a statement consistent with the agreement with the IMF. However, he maintained that the government has privately shared the relief costs with the chairman of the standing committee.
When MNA Muhammad Javed Hanif Khan asked if the cost of relief was Rs.360 billion, standing committee chairman Syed Naveed Qamar replied that “you were very close”. Later, he said the cost was about Rs 360 billion.
The Express Pakinomist had reported that the government gave Rs360 billion in tax breaks, including Rs115 billion to the real estate sector and Rs52 billion to the salaried class.
The finance ministry had informed the federal cabinet that the cost of reducing the withholding taxes for the real estate sector was Rs 115 billion.
The sources said the government was still in discussions with the IMF, which was not very comfortable with halving tax rates on the sale and purchase of properties.
It was unprofessional on the part of the government not to share the relief costs with the legislators, observed Hina Rabbani Khar, MNA and member of the standing committee.
The cabinet was further told that the impact of reducing federal excise duty rates on airline tickets was Rs24 billion and Rs17 billion was the cost of lowering withholding tax rates on debit and credit card international transactions to 0.5%.
Bilal Kayani, the minister of state for finance, said people were circumventing the hefty taxes on business class air tickets by either upgrading their tickets after boarding the flight or by ordering from abroad.
About Rs 7 billion was the cost of scrapping the 1% capital gains tax on foreign transactions, according to the government’s briefing to the cabinet last week.
Hamid Ateeq Sarwar, FBR’s strategic transformation member, said the capital value tax should be abolished on demand from abroad and also because Pakistanis were becoming non-residents to avoid the tax.
Qamar sought clarity on whether the expected revenue losses had been adequately quantified and requested details of the government’s strategy to offset any resulting fiscal deficits.
The committee also discussed relief for wage earners in the face of persistent inflation and rising costs of living, and sought clarification on whether the proposed tax plan revisions would provide meaningful relief to middle-income groups.
Kayani said the maximum possible relief had been extended to the salaried.
The chairman noted that tax breaks must remain fair and economically justified, while stressing the need to broaden the tax base and improve compliance. He directed 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 do away with the requirement to pay advance income tax for exporters. He said the move would help solve the liquidity problems.
On another issue, the strategic membership transformation added that the government was collecting about Rs 400 billion annually from the super tax, which it cannot immediately abolish. The super tax had been introduced as an emergency measure many years ago. The government has proposed in the budget to abolish the super tax on Rs500 million annual incomes and charge 8% rate on the higher income.
However, the super tax rate will be 10% for banks, oil and gas exploration companies and the fertilizer companies.
Hamid Ateeq said banks’ lending to the government had increased to 80% of their total lending after lifting the limits on deposit advances. The violation of these limits used to attract additional taxes, which the government put an end to, and as a result, there is hardly any money available for private sector borrowers.
The committee was informed that the budget package includes eleven relief measures, ten rationalization measures and five administrative reforms aimed at promoting economic growth, encouraging investment, improving documentation of the economy, improving tax compliance and strengthening revenue collection.
Kayani said the government abolished the 18% sales tax on the shipping industry in light of the lessons learned from the conflict in the Middle East. He said there was a need to develop the local shipping industry.
Qamar was of the view that the duty had been abolished after the National Logistic Cell took over the Pakistan National Shipping Corporation.
The committee was informed that the aid package includes the abolition of taxes on contraceptives and selected women-related products.
Calling taxes on sanitary products as “pink tax” was ridiculous, said MNA Sharmila Faruqui.
