PESHAWAR – Khyber Pakhtunkhwa’s budget for FY2026-27 is coming today with new taxes on transport and hotels, along with relief measures for property owners, and a development programme worth over Rs524 billion.
The proposed budget for FY2026-27 projects rise in employee-related expenditures, with salary spending expected to increase by 13% and pension payments by 17% compared to the current fiscal year. The higher allocations reflect growing financial commitments toward the province’s workforce and retired employees.
Budget documents also project a 13% increase in salary expenditures and a 17% rise in pension spending, while the province expects to generate Rs150 billion from its own revenues.
According to the proposed Finance Bill, the province expects to generate Rs150 billion through its own revenue sources while relying heavily on federal transfers to finance a budget estimated at Rs2.17 trillion.
The relief measures in the bill is a 30% discount for homeowners who clear all outstanding residential property dues in a single payment by June 30, 2026. However, the government has paired this incentive with a warning: taxpayers who fail to settle their liabilities by December 31, 2026, could face penalties.
The budget also introduces fresh tax proposals targeting transport and hospitality sectors. Motor rickshaws and three-wheelers would be subject to an annual tax of Rs1,000, while commercial vehicles would be taxed according to seating capacity. Vehicles with six to fifteen seats are proposed to pay Rs400 per seat annually, whereas larger vehicles carrying more than fifteen passengers would pay Rs500 per seat.
Hotels are also set to come under greater scrutiny. Under the proposed framework, hotels connected to the Point of Sale (POS) system would pay a 5% tax based on room bookings and occupancy. Those operating outside the system could face a higher effective burden, with taxes calculated at 10% of actual room rent using half of their available accommodation capacity as the benchmark. A separate 20% concession has also been proposed for eligible lump-sum payments made by June 2026.
Despite the new taxation measures, the government plans substantial increases in employee-related expenditures. Salary spending is expected to rise by 13% compared to the previous fiscal year, while pension payments are projected to increase by 17%, reflecting the growing financial pressures associated with the province’s workforce and retirees.
On the expenditure side, the proposed budget allocates Rs1.645 trillion for current expenditures, including administrative operations and public services. Development spending is expected to exceed Rs524 billion, underscoring the government’s emphasis on infrastructure, public welfare, and long-term economic growth.
Federal transfers remain the backbone of the province’s finances. Budget estimates suggest KP will receive more than Rs1.584 trillion from federal sources. This includes over Rs1.540 trillion from federal tax revenues, alongside more than Rs149 billion earmarked for expenditures related to counterterrorism efforts.
Additional income streams are expected from the energy sector, with projections of more than Rs53 billion from oil and gas surcharges and over Rs24 billion through the windfall levy on oil.
The proposed Annual Development Programme, valued at more than Rs524 billion, signals the government’s intention to accelerate development projects across the province. However, the combination of new taxes and increased spending is likely to spark debate over how the government balances revenue generation with economic relief for businesses and citizens.
More updates to follow on this…
