Post-budget press briefing: Govt warns of Rs500bn more revenue steps

Business Recorder

a day ago

ISLAMABAD: Finance Minister Muhammad Aurangzeb on Wednesday warned that additional revenue measures of up to Rs 500 billion would be taken next fiscal year, if enabling amendments and legislation on enforcement were not passed by parliament, adding that all the budget figures were locked with the International Monetary Fund (IMF).
This he stated while addressing the post-budget press briefing which began with journalists from the independent media staging a walkout in protest against the Federal Board of Revenue's failure to provide the traditional technical briefing on the Finance Bill 2025-26 after the budget speech.
Finance Minister flanked by FBR Chairman Rashid Mehmood Langrial and Secretary Finance continued the post-budget press briefing despite the boycott.
Budget 2025-26: Pakistan targets 4.2% growth as Aurangzeb presents proposals 'for a competitive economy'
Information Minister Ataullah Tarar was summoned to clear the air with the protesting journalists who tendered an apology with the assurance that the technical briefing would be held prompting independent journalists to end their boycott and rejoin the press conference after more than half an hour.
The minister said, strengthened enforcement mechanisms have helped the federal government generate over Rs400 billion in additional revenues this fiscal year. He noted that while international stakeholders had previously doubted Pakistan's ability to implement tax laws effectively, the government had demonstrated that meaningful enforcement is possible.
He said, tax-to-GDP ratio was projected to reach 10.4 percent this year and to 10.9 percent in fiscal year 2025-26. Of the Rs2.2 trillion targeted in overall revenue, only Rs312 billion is expected from new taxes, with the remainder stemming automatically from growth and enforcement.
'We have two ways — either we ensure enforcement or we introduce additional measures of up to Rs 400 to 500 billion. This is why we will go to the parliament to help us out with the enabling amendments and legislation,' said the minister, adding that they needed enabling amendments and legislation to plug leakages in the system.
The minister further said that laws, legislation and taxes were there but there is lack of enforcement. 'The things that had never been reversed before have now been put into reversal, but that's not the eventual end state,' said the minister adding that the segments that have been subjected to undue burden, whether it's the formal sector, the beneficiary sector, the salaried class, the government should at least acknowledge that it is cognizant of their problems and that it will deal with those as soon as fiscal space is created.
Talking about a 10 percent surcharge on electricity bills, FBR Chairman clarified that no additional surcharge has been imposed so far.
Replying to a question regarding the federal government's plan to potentially delink population from the National Finance Commission (NFC) award, Finance Minister stated, 'everything will be done in consultation with the provinces including the national fiscal pact which was signed with the provinces. The provinces are projected to receive a record Rs8.2 trillion from the federal divisible tax pool in the upcoming fiscal year.'
The minister termed tariff rationalization as a 'major and important step' in aligning Pakistan's trade and industrial policy with global standards. The initiative, he said, marks the beginning of a phased plan towards a simplified tariff regime, ultimately targeting an average tariff rate of just over 4 per cent.
'Overall, there are 7,000 tariff lines. Additional customs duty has been removed on 4,000 lines, and in 2,700 of those, the customs duty has also been reduced,' the finance minister stated. 'Of these, around 2,000 tariff lines are directly linked to raw materials and intermediary goods used by exporters. This is a structural reform that has not been undertaken in the past 30 years. This is a huge step, and we are committed to taking it forward gradually', Aurangzeb added.
The government's broader goal, according to Aurangzeb, is to reshape Pakistan's tariff architecture in a way that supports industrial growth and integrates the economy more deeply into global supply chains. Highlighting the significance of the policy shift, Aurangzeb said the reduction and elimination of customs duties on thousands of tariff lines will enable more efficient allocation of both capital and human resources within the economy.
The reforms are designed to gradually replace import substitution with export promotion, a pivot the government considers essential for addressing Pakistan's recurring balance of payments crises and dollar liquidity pressures.
He said that the government has offered as much relief as possible to the salaried class within the constraints of available fiscal space.
'This is the direction of travel, where do we want to take the salaried class. Different slabs, including at the highest levels, have been carefully considered. From both my perspective and the Prime Minister's, we provided as much relief as the fiscal space allows,' Aurangzeb said.
He said the minimum wage would remain at its current level, Rs37,000, adding that it should be viewed in the context of inflation. 'Go to the industries and get their feedback on minimum wage. I think we are in a good place,' he asserted.
Responding to criticism over salary hikes, the finance minister said, 'If we talk about raising salaries of government employees, then ministers' salaries should also be reviewed.'
He pointed out that the salaries of the Senate chairman, deputy chairman, National Assembly speaker, and deputy speaker were recently increased.
When questioned about whether their salaries had been raised from Rs250,000 to Rs2.15 million per month, the minister remarked that the focus should be on when ministers, ministers of state, and parliamentarians last received a salary adjustment.
'The cabinet ministers' salaries were last increased in 2016. If a salary raise had been made annually, the recent hike would not seem so high,' he explained.
He also pointed to the phased reduction of the super tax on mid-sized corporations as part of the government's commitment to improving the business climate. 'Even if it's just a 0.5 percent reduction, it sends an important signal to the market,' Aurangzeb contended.
The government, he said, announced a series of targeted reforms in the construction and agriculture sectors aimed at reducing transaction costs, supporting affordable housing, and ensuring credit access for small farmers. While overall tax liability has not been reduced, the government restructured the system to lower transaction costs, particularly for buyers, he claimed.
To a question, the minister said, the increases in salaries and pensions were directly linked to the headline inflation, Consumer Price Index (CPI), ensuring adjustments reflect inflationary pressures. Aurangzeb said that pensions would now be linked to a Contributory Based Index (CBI) to ensure long-term sustainability. 'Worldwide, pensions and salaries are adjusted with inflation. We are adopting the same principle,' he added.
Replying to a question regarding the contributory system for armed forces, Secretary Finance said that meetings were held with Defence Ministry in this regard, however, it was agreed that they could not be treated the same way on account of different terms of retirement period.
Aurangzeb said no tax has been levied on fertilizers and pesticides which was negotiated with the IMF on the directions of Prime Minister Shehbaz Sharif as the administration regards these items as critical inputs for agriculture.
'Agriculture has been, and will remain, the backbone of our economy,' he said, adding that greater federal policy coordination is needed on devolved subjects like seed technology, mechanization, and agri-financing.
He pointed to a modest 1.9 percent rise in government expenditure, crediting prudent financial management and stated that despite inflation, the government managed to contain subsidies and reduce debt servicing, while selectively increasing spending, where necessary, for national priorities.
Aurangzeb stressed on the need to end protectionism, increase productivity and reduce the price of raw materials so that not only textiles but every exporting sector benefits.
Responding to a question the finance minister said that the first installment of Eurobonds worth $500 million was due in September, while the next was due in March. 'We are prepared and willing to pay', he added.
The minister reiterated his hopes of Pakistan launching yuan-denominated Panda bonds this year, adding that credit enhancement through the Asian Development Bank and the Asian Infrastructure Investment Bank was in progress.
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