• Revenue targets already finalized with IMF, says finance secretary
• First income tax slab lowered to 2.5% instead of the initially proposed 1%
• Adjustment compensates for fiscal impact of increased government salaries
• Aurangzeb justifies significant pay raises for lawmakers and ministers
• Government refrains from raising minimum wage due to industry resistance
• Contributory pension scheme for military personnel may be delayed
ISLAMABAD: Finance Minister Muhammad Aurangzeb issued a stark warning on Wednesday, stating that the government may need to impose an additional Rs400-500 billion in taxes if lawmakers reject the proposed enforcement measures in the 2025-26 budget—measures already agreed upon with the International Monetary Fund (IMF).
During his post-budget press conference, the usually quiet minister encouraged colleagues parliamentarians to accept the enforcement clauses, warning that failing to do so would result in additional tax increases. His words alluded to potential opposition from the ruling party, coalition partners, and other prominent groups.
While Aurangzeb did not specify which provisions were at risk, he appeared to be referring to the Federal Board of Revenue’s (FBR) expanded powers, such as the ability to restrict high-value transactions by non-filers, such as property and vehicle purchases, securities investments, and premium banking accounts. Other actions include closing down unregistered firms, confiscating items, and collecting taxes from both governmental and private sector institutions.
The National Assembly’s Standing Committee on Finance and Revenue had earlier expressed concerns about several of the provisions established by the Tax Laws (Amendment) Ordinance 2025, indicating potential opposition during legislative scrutiny. Aurangzeb emphasised the importance of legal backing in ensuring compliance and sustaining revenue development.
Of the Rs700 billion in projected additional collections for the 2018 fiscal year—aside from the forecast 12% organic growth from inflation and economic activity—Rs389 billion is contingent on enforcement efforts, while Rs312 billion comes from new tax measures.
“These figures are locked in with the IMF,” stated Finance Secretary Imdadullah Bosal. He noted that the cabinet’s decision to raise government salaries by 10% (up from the initially proposed 6%) would cost an extra Rs28 billion, offset by adjustments in income tax rates.
The first tax slab for salaried individuals (earning between Rs600,000 and Rs1.2 million annually) was reduced to 2.5%, as announced in the budget speech, rather than the 1% initially printed in the Finance Bill.
Aurangzeb acknowledged that international stakeholders have historically doubted Pakistan’s ability to enforce tax laws but stressed that recent recoveries of Rs400 billion have bolstered credibility. He warned that without legal support for enforcement, the government may be forced to impose further taxes.
Journalists Protest Briefing Cancellation
The press conference was disrupted when journalists walked out over the cancellation of a customary technical briefing on the Finance Bill. The boycott grew as officials held the event without media present. Information Minister Attaullah Tarar, who was initially missing, intervened to resolve complaints and urge journalists to return.
Defence of Salary Increases and Pension Delays
Aurangzeb defended significant compensation hikes for MPs and ministers, some of which were up to 550%, claiming that the adjustments were long overdue, with the most recent revision being in 2016. He claimed that modest annual increments would have avoided such a sudden increase.
Meanwhile, Bosal hinted at probable delays in introducing a contributing pension scheme for military forces members, which was initially scheduled for July 2025, citing continuing discussions with the Ministry of Defence. Neither official disclosed details about military salary increases or the Rs70 billion allocation for parliamentarians’ schemes, up from the Rs50 billion approved earlier.
Limited Tax Relief and Future Reforms
The minister admitted that tax reductions for salaried individuals and businesses were modest but framed them as part of a broader strategy to ease fiscal pressure over time. He reiterated the government’s awareness of public financial strain, calling the adjustments a step in the right direction.
Regarding the National Finance Commission (NFC), Aurangzeb confirmed that provincial nominations were being sought, with a meeting scheduled for August. He dismissed claims that the federal government could unilaterally alter population-based resource distribution.
When challenged about a projected debt servicing surcharge (DSS) on electricity, the minister refused to mention it in his address, despite budget documents indicating its use for debt repayment and potential hikes above the present 10% maximum.
Minimum Wage and the Economic Outlook
Aurangzeb indicated that the government avoided raising the minimum wage due to the business sector’s unwillingness to comply with current rates. He expressed confidence in repaying international bonds due in September 2025 and April 2026 and announced plans to issue Panda bonds in China later this year, with a potential return to Western markets in 2026 if credit ratings improve.
Trade Reforms and Climate Initiative
The government has slashed customs duties on 4,000 tariff lines and reduced rates on 2,700 more as part of trade reforms aimed at global alignment. Aurangzeb emphasised that 2,000 of these lines relate to raw materials for exporters, describing it as a long-overdue structural change.
Finally, he lauded Dawn Media’s climate project, Breathe Pakistan, emphasising the critical threat of climate change. Citing recent harsh weather in Islamabad, he praised the campaign for increasing awareness and encouraging action on environmental issues.
