Govt withholds tax relief cost from NA panel as Rs360bn estimate surfaces

ISLAMABAD: The government declined on Monday to disclose to the National Assembly Standing Committee on Finance the full fiscal cost of its proposed tax relief package, citing ongoing discussions with the International Monetary Fund (IMF), even as the committee’s chairman indicated the package was valued at about Rs360 billion.

Finance Secretary Imdadullah Bosal told the panel that the figures could not be shared publicly at this stage because of talks with the IMF. In response to a question from MNA Jawed Hanif Khan, Bosal said any relief would have to be matched by an equivalent amount through additional revenue and enforcement measures, consistent with Pakistan’s commitments under its arrangement with the Fund. He added that the details had been shared privately with the committee chairman.

When MNA Muhammad Javed Hanif Khan asked whether the relief package cost Rs360 billion, standing committee chairman Syed Naveed Qamar first replied that the estimate was close, and later said the amount was roughly Rs360 billion. Hina Rabbani Khar, also a member of the committee, said it was unprofessional for the government not to share the cost of the relief package with lawmakers.

Breakdown discussed before committee

The committee was informed of several tax changes included in the package. According to the government’s earlier briefing to the federal cabinet, reducing withholding taxes for the property sector would cost Rs115 billion. The same briefing put the cost of relief for the salaried class at Rs52 billion.

The cabinet was also told that reducing federal excise duty on air tickets would have a revenue impact of Rs24 billion, while lowering withholding tax on international debit and credit card transactions to 0.5% would cost Rs17 billion. About Rs7 billion was linked to the abolition of the 1% capital value tax on foreign transactions.

Minister of State for Finance Bilal Kayani said passengers had been avoiding high taxes on business class tickets by upgrading after boarding or booking from abroad. Hamid Ateeq Sarwar, member strategic transformation at the Federal Board of Revenue (FBR), told the committee that the capital value tax was being withdrawn at the request of foreign countries and because some Pakistanis were becoming non-residents to avoid paying it.

Questions over offsetting the relief

Qamar asked whether the expected revenue losses had been fully estimated and sought details of the government’s plan to make up any fiscal shortfall. The committee also reviewed proposed relief for salaried taxpayers amid inflation and higher living costs, and asked whether revisions in tax slabs would translate into meaningful support for middle-income groups.

Kayani told the panel that the maximum possible relief had been given to salaried individuals. Qamar said tax relief should remain fair and economically justified, while also stressing the need to widen 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 the Finance Bill, 2026 proceeds further.

Other tax and reform measures

Hamid Sarwar told the committee that the government had also decided to abolish advance income tax for exporters, saying the step would help address liquidity problems. On another issue, he said the government was collecting roughly Rs400 billion a year through the super tax and could not eliminate it immediately.

He said the super tax had originally been introduced as an emergency measure. Under the budget proposals, the government plans to abolish the super tax on annual incomes of Rs500 million and apply an 8% rate on higher income, while banks, oil and gas exploration companies, and fertilizer firms would face a 10% rate.

Sarwar further told lawmakers that banks’ lending to the government had risen to 80% of their total lending after the end of advance-to-deposit ratio limits. He said those limits had previously triggered additional taxation when violated, but after their withdrawal there was now hardly any money available for private-sector borrowers.

The committee was also told that the overall budget package included 11 relief measures, 10 rationalisation steps and five administrative reforms aimed at promoting growth, encouraging investment, documenting the economy, improving tax compliance and strengthening revenue collection.

Kayani said the government had removed the 18% sales tax on the shipping industry in light of lessons drawn from the Middle East conflict and the need to support local shipping capacity. Qamar, however, said he believed the tax had been abolished after the National Logistic Cell took over the Pakistan National Shipping Corporation.

Lawmakers were further informed that the package included the removal of taxes on contraceptives and certain women-related products. During the discussion, MNA Sharmila Faruqui said calling taxes on sanitary products as 'pink tax' was ridiculous.