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Express Tribune
26-06-2025
- Business
- Express Tribune
Budget 2025-26 sails through NA with sweeping tax reforms
The National Assembly on Wednesday approved the Rs17.57 trillion federal budget for the fiscal year 2025-26 with certain amendments, rejecting opposition calls for public consultation and clearing the way for a raft of tax reforms, revenue measures, and government spending plans for the coming year. The Finance Bill 2025 — aimed at giving effect to the federal government's financial proposals for the fiscal year starting July 1, 2025, and amending various existing laws. The session, chaired by Speaker Ayaz Sadiq, began with Finance Minister Mohammad Aurangzeb moving the Finance Bill 2025, which was taken up for a clause-by-clause review. Opposition members proposed an amendment to delay the approval of the bill and seek public consultation, but this amendment was overwhelmingly rejected. Read more: Govt has agreed to income tax exemption on annual salary below Rs1.2m: Bilawal Aurangzeb moved to introduce the Finance Bill in the form recommended by the Standing Committee, despite opposition objections. One of the key clauses approved during the session addressed sales tax fraud. The bill introduced measures for arresting individuals involved in tax fraud, including penalties for issuing invoices without the delivery of goods or tampering with tax records. Additionally, amendments allowed for the arrest of individuals attempting to destroy tax evidence or providing false information in tax returns. Prime Minister Muhammad Shehbaz Sharif meets Chairman Pakistan People's Party Bilawal Bhutto Zardari during the budget session in the National Assembly. — Government of Pakistan (@GovtofPakistan) June 26, 2025 Another important provision of the Finance Bill 2025 included a carbon levy of Rs2.50 per liter on petroleum products, which was approved under clause 3. The opposition's amendments on this clause were also rejected. Furthermore, the bill imposed a 10% sales tax on solar panels to promote sustainable energy while generating government revenue. The Customs Act of 1969 was also amended to enhance anti-smuggling efforts. The new provisions mandated the installation of cargo tracking systems for better monitoring of imports, exports, and transit goods. Penalties were introduced for not using the electronic bill (e-bill) system for the domestic movement of goods, and severe fines and imprisonment were imposed for tampering with tracking devices. The House passed the amended Clause # 10 & Clause # 11 of the Finance Bill, 2025.#NASession#BudgetSession2025 — National Assembly 🇵🇰 (@NAofPakistan) June 26, 2025 The bill also introduced significant changes to the income tax system for salaried individuals. Employees earning up to Rs600,000 annually were exempted from tax, while new tax slabs were introduced for higher income groups. Additionally, the House approved amendments concerning parliamentarians' salaries and allowances. Under these changes, the determination of parliamentarians' pay would be handled by the House Committee, rather than the Secretariat. Federal ministers and ministers of state would now receive the same salary as Members of Parliament. In his statement following the budget approval, PPP Chairman Bilawal Bhutto Zardari expressed full support for the budget, noting the government's acceptance of several party recommendations, including the 20% increase in funding for the Benazir Income Support Program (BISP). 'حکومت نے پاکستان پیپلز پارٹی کی سفارشات کو مان کر بجٹ میں شامل کیا اس لیے ہم اس بجٹ کو سپورٹ کررہے ہیں۔ ہماری حمایت کی وجہ یہ ہے کہ اس بجٹ میں پاکستان پیپلز پارٹی کی سفارشات پر عمل کرتے ہوئے بینظیر انکم سپورٹ پروگرام میں 20 فیصد اضافہ کیا جارہا ہے، تنخواہ دار طبقے کو ریلیف… — PPP (@MediaCellPPP) June 26, 2025 He also highlighted the reduction of taxes on solar panels and the government's alignment with PPP proposals regarding tax reforms. With the final approval of the Finance Bill 2025-26, the total federal budget for the fiscal year has been set at Rs17.57 trillion. Speaker Ayaz Sadiq concluded the session, which will resume at 11 AM the next day.
Business Recorder
10-06-2025
- Business
- Business Recorder
Who's afraid of the Budget?
Is it the government? If the budget is to be strategic, as the finance minister says, and if it has to reflect the leadership's resolve, as the prime minister says, and if it has to fuel structural reforms, as the entire cabinet says, then today's budget will need to show the kind of courage that no previous budget has shown. For this to happen, the government will need to be fearless. Here's the problem, though. The fear of being fearless haunts the budget makers more than it should. It is a fear triggered by the demands of assorted lobbies, pressure groups and political gravy trains. Only a fearless government can resist such pressure, defy such demands, and barrel ahead with reforms that Pakistan so desperately needs. These needs are well known. On the revenue side, broadening the tax net and privatising state-owned enterprises remain key challenges. On the expenditure side, reducing the size of the government and reforming the pension system top the priority list among various other items. Not much can be done with interest payments, or revenue share of the provinces, or the defence budget. So, within these constraints, the government has to show courage and do what previous governments have feared to do. The base is set. While launching the Economic Survey on Monday, Finance Minister Mohammad Aurangzeb talked about the macroeconomic improvements from last year. He is not wrong. Inflation and interest rates have come down impressively while foreign exchange reserves and stock markets have risen significantly. As has consumer confidence, if latest surveys are to be believed. The exchange rate has held steady, and the IMF programme is on track. Credit must be given where credit is due. Clarity of policy played a role, IMF's requirements played a role, and fiscal discipline played a role. Courage though was not the main ingredient. Now it will need to be. The government will need courage to tax those powerful sectors and lobbies that remain outside the net; it will need courage to right-size the federal government in face of stiff resistance from political and bureaucratic vested interests, and it will need courage to push through reforms in the power sector. So far, we have not seen a display of such courage from this government. Neither have we seen any serious conversations between the federation and the provinces on the National Finance Commission Award. The finance minister mentioned during Monday's press conference that such a discussion might take place in the next few months. Good. But why was this not done earlier? Lack of resolve? Speaking of resolve, much will be needed if the policy of export-led growth has to deliver dividends. The finance minister has been making the right noises about not falling prey to the boom-and-bust cycles of yesteryears in a rush for growth. But export-led growth will require the government to actually promote and incentivise exports, not tax them like it does presently. This would also require innovation and dynamism to help the private sector move on to value added exports. So far, the government has opted for shortcuts to get macro numbers in order. It has taxed the already over-burdened salaried class, shied away from major government right-sizing, kicked the privatization can down the road and vocalized power sector reforms instead of implementing them. The time for such shortcuts is now over. The business-as-usual type of budget will not cut it anymore. Neither will high sounding claims meant for political consumption. If the finance minister's budget speech today does not have real substance for real reform, it will betray the government's inability to muster the courage required at this time. More so because few governments have had the open field to drive through reform than this one. The civil-military equation is at its supportive best, the state is fresh off a morale-boosting victory over India, the opposition is in tatters and international financial institutions – as well as major regional and global powers – are lending a hand (and dollars) wherever needed. There is never a better time to display courage, resolve and determination to cut through all pressures, lobbies and vested interests. Today's budget is a test-case to see if this government – with all the advantages that it enjoys – can walk the talk. There is a broad consensus that continuity of policy can breed good economic dividends. This means staying the course and not being distracted by political compulsions or expediencies. The present system faces no risk to its longevity for now. This is a luxury few have had in previous terms. It would be unfortunate if at this critical juncture the government wastes the opportunity to reform the system with courage and conviction. We will not have to wait long to deliver the verdict. Copyright Business Recorder, 2025
Business Recorder
06-06-2025
- Business
- Business Recorder
Hoping against hope for a ‘bold budget'
EDITORIAL: The finance minister, Mohammad Aurangzeb, is describing the upcoming budget as a 'bold budget.' However, the FBR (Federal Board of Revenue) is attempting to impose regressive and lazy taxes through the backdoor measures that can be called anything but certainly not bold. The tax machinery remains fixated on extracting revenue without broadening the tax base, and in doing so it is, in fact, strangling the formal economy. A glaring example is the government's last-minute attempt to impose a Capital Value Tax (CVT) on movable assets such as cash and gold — a move rightly objected to by the IMF (International Monetary Fund). The government's mindset appears to be to offer relief through populist measures, while making up the revenue shortfall with ad hoc, irrational proposals. There remains no considerable effort to expand the tax base or bring the under-taxed and untaxed segments into the net. Simultaneously, the government is proposing to increase the withholding tax (WHT) rate on income from bank deposits and investments in mutual funds — while also attempting to apply CVT on cash. Such steps will only push the economy further into informality, encouraging people to withdraw funds from the banking system and divert savings into gold, foreign currency, or even hide the money under their mattresses. Pakistan's tax system is already highly regressive, with one of the highest sales tax rates and widespread application of Federal Excise Duty (FED) and WHT (Withholding Tax) across transactions of various goods and services running in parallel with sales tax and federal excise duty in VAT mode. A sizeable portion of income tax is collected at the import stage. Now, the proposal for a wealth tax adds another layer of burden, not reform, but regression. Previously, the government imposed CVT on foreign assets, including those declared under the amnesty scheme — despite the explicit promise that, upon paying the specified tax, wealth would be accepted as legitimate. The government later backtracked on this commitment, and the CVT, therefore, is now being challenged in court. Those who declared their wealth feel betrayed, while those who did not are reaping the benefits. Now, even those who have fully declared and paid taxes on their assets are being pushed toward informality. The kind of taxes FBR is proposing will only deepen the grey areas of the economy. Needless to say, Pakistan already suffers from an abysmally low savings rate, which translates into low investment. The savings-investment gap perpetrates current account deficits, triggering recurring balance of payments crises. Regressive tax measures will only worsen this trend by discouraging savings. The continuation of high-income taxes, including super taxes, is also a significant deterrent to investment and capital formation. The talk of a wealth tax causes further uncertainty and dampens investor confidence. The core issue is that the government seems intent on taxing everything that is documented — merely plugging in numbers wherever feasible. This mindset, along with coercive tactics, erodes trust between the state and the taxpayer and undermines efforts to broaden the tax base. Domestic investors and family business groups are shifting their wealth abroad. Salaried professionals are seeking jobs outside Pakistan. Talent and capital are both leaving the country. This outflow seriously threatens privatisation efforts, especially since history shows that when domestic investors have earned returns — such as in the case of IPPs — the state has reneged on its commitments. Foreign investors, on the other hand, have at times been spared the same treatment. This disparity has made local investors reluctant to bid for Discos unless backed by foreign partners — yet foreign interest remains weak, as seen in the case of KE shareholders who have not received a single rupee as dividend in 20 years. The government urgently needs to improve investor sentiment and foster an enabling environment for investment. However, the current approach — milking the formal sector to implicitly subsidise the informal one — is exacerbating the problem. If the government genuinely wants to be bold, it must do the right things: build trust, broaden the tax net equitably, and create policies that support sustainable, inclusive economic growth. Copyright Business Recorder, 2025
Business Recorder
29-04-2025
- Business
- Business Recorder
Aurangzeb highlights Pakistan's economic turnaround
ISLAMABAD: Federal Minister for Finance and Revenue, Senator Mohammad Aurangzeb, while speaking at Pakistan Conference 2025 at Harvard University, said that Pakistan had reached a pivotal moment of economic recovery and transformation. 'After inheriting an economy facing significant challenges—from contracting GDP to depleting reserves—we have stabilized the fundamentals, restored confidence, and reignited growth,' he said at the conference titled 'Bridging Divides, Building Tomorrow: Pakistan's Path to Inclusive Growth and Governance.' The Pakistan Conference is an annual flagship event that brings together policymakers, academics, business leaders, and students to discuss Pakistan's economic, political, and social trajectory, according to a press release issued by finance ministry here Monday. Organized by Harvard students with support from university research centers, the event is the largest student-led conference on Pakistan in the United States. The conference serves as a vital forum to advance collaborative solutions, promote global engagement, and showcase the creativity and resilience of the Pakistani people. Pakistan eyes to replicate Indonesia's nickel success with copper, says Aurangzeb Aurangzeb highlighted key achievements including a historic reduction in inflation to 0.7%, the lowest in 60 years; foreign exchange reserves doubled; a 3% currency appreciation; and a current account surplus exceeding $1 billion in March 2025. Pakistan also witnessed a 44% increase in Foreign Direct Investment (FDI), a 24% rise in IT exports, and record-high remittances projected at $38 billion. For the first time in 24 years, Pakistan achieved a fiscal surplus, with the highest primary fiscal surplus in two decades. Fitch has upgraded Pakistan's credit sovereign credit rating to B- with a stable outlook. Emphasizing that 'stability is not an end but a means to an end, ' the Finance Minister outlined the government's strategy including maintaining fiscal discipline, controlling inflation, and pushing ahead with deep structural reforms in energy, taxation, governance, and the management of state-owned enterprises. He flagged major growth opportunities in Pakistan's rich mineral resources, expanding IT sector, green energy initiatives, and the country's youthful entrepreneurial population. Strengthening human development, he emphasized, is critical to sustaining high, inclusive growth.
Business Recorder
28-04-2025
- Business
- Business Recorder
Aurangzeb highlights economic turnaround
ISLAMABAD: Federal Minister for Finance and Revenue, Senator Mohammad Aurangzeb, while speaking at Pakistan Conference 2025 at Harvard University, said that Pakistan had reached a pivotal moment of economic recovery and transformation. 'After inheriting an economy facing significant challenges—from contracting GDP to depleting reserves—we have stabilized the fundamentals, restored confidence, and reignited growth,' he said at the conference titled 'Bridging Divides, Building Tomorrow: Pakistan's Path to Inclusive Growth and Governance.' The Pakistan Conference is an annual flagship event that brings together policymakers, academics, business leaders, and students to discuss Pakistan's economic, political, and social trajectory, according to a press release issued by finance ministry here Monday. Organized by Harvard students with support from university research centers, the event is the largest student-led conference on Pakistan in the United States. The conference serves as a vital forum to advance collaborative solutions, promote global engagement, and showcase the creativity and resilience of the Pakistani people. Pakistan eyes to replicate Indonesia's nickel success with copper, says Aurangzeb Aurangzeb highlighted key achievements including a historic reduction in inflation to 0.7%, the lowest in 60 years; foreign exchange reserves doubled; a 3% currency appreciation; and a current account surplus exceeding $1 billion in March 2025. Pakistan also witnessed a 44% increase in Foreign Direct Investment (FDI), a 24% rise in IT exports, and record-high remittances projected at $38 billion. For the first time in 24 years, Pakistan achieved a fiscal surplus, with the highest primary fiscal surplus in two decades. Fitch has upgraded Pakistan's credit sovereign credit rating to B- with a stable outlook. Emphasizing that 'stability is not an end but a means to an end, ' the Finance Minister outlined the government's strategy including maintaining fiscal discipline, controlling inflation, and pushing ahead with deep structural reforms in energy, taxation, governance, and the management of state-owned enterprises. He flagged major growth opportunities in Pakistan's rich mineral resources, expanding IT sector, green energy initiatives, and the country's youthful entrepreneurial population. Strengthening human development, he emphasized, is critical to sustaining high, inclusive growth.
