THE National Assembly passed a Rs. 18.8 trillion budget for the financial year 2026-27, which envisages Rs. 15.3 trillion tax target. The House also approved the Finance Bill 2026 with several amendments, authorizing the government to implement over Rs.1 trillion in policy and enforcement measures in an effort to meet the ambitious tax collection target.
The way the Government almost totally ignored recommendations and suggestions made by the Upper House of the Parliament and Members of the National Assembly during, otherwise, exhaustive debate on the budgetary proposals for the next year confirms once again that the elected representatives have no major say in budget formulation and finalization. The Senate has no role in the passage of the budget but there is no denying the fact that its members worked hard to give worthwhile input to the lower house and incorporation of its main recommendations would have made the document reflective of the aspirations of the people. Regrettably, the authorities concerned either ignored or modified key recommendations of the Senate especially those concerning tax exemptions and salary increase. The only worthwhile amendment incorporated in the Finance Bill was lowering of the tax on imported mobile phones of up to Rs.55,600 or $200 value only. The measure is appreciable but not enough as there is legitimate demand for high end phone sets particularly in view of imminent introduction of 5G service by telecom operators. The Government employees and pensioners have been given a lollipop of 10% and 7% increase respectively in pays and pensions in the backdrop of sharp rise in price-hike. The decision-makers cite resource constraints but such claims are negated by the fact that import duties on a number of items including second hand cars have been reduced under pressure of the International Monetary Fund (IMF), a decision that runs contrary to the objective of increasing tax collection.
The Government claims the new budget was aimed at striking a balance between reversing the injustice being meted out to the salaried class, helping the real estate sector to kick-start the business and lowering the tax burden of the corporate sector. However, analysts point out clear distortions. The property sector has been given a Rs.115 billion relief out of its little over Rs.200 billion tax contribution. Compared to this, the salaried class has been extended Rs.52 billion relief out of the Rs.630 billion annual contributions in the last fiscal year. Similarly, the Government has lent deaf ears to legitimate demands by all segments of the society as well as the law-makers not to impose taxes on food items and educational material. The prices of some packaged products are expected to increase after the government decided to charge sales tax on their printed values, putting an additional burden of Rs.91 billion on people. Despite tall claims about documentation and broadening of the tax base, a latest amendment allows small traders to opt out of the newly announced fixed income scheme after one year, which reflects poorly on the ability of the Government to fairly pursue its stated goal of expanding the tax net. The budget envisages significantly enhanced allocations for defence in view of the internal security environment and regional situation. It is encouraging that provinces have agreed to share some of the responsibility by pledging to make contributions for the purpose by slashing their development programmes. Pakistan badly needs more water reservoirs and must expedite work on existing projects but allocations for the water sector do not correspond to the actual needs. Finance Minister Muhammad Aurangzeb hopes the budgetary proposals will help stimulate growth but economists believe these are not enough and much more is to be done to reduce the cost of doing business.
