• Finance secy says revenue numbers are already locked with IMF
• Income tax rate of first slab reduced to 2.5pc, not 1pc as initially printed in Finance Bill
• Change offsets additional fiscal impact from increased govt salaries
• Aurangzeb defends steep pay hikes for lawmakers, ministers
• Says govt held back on raising minimum wage as industry unwilling to implement previous rate
• Contributory pension scheme for forces personnel may face delays

ISLAMABAD: Finance Minister Muhammad Aurangzeb on Wednesday repeatedly warned that the government would be compelled to impose a further Rs400 to 500 billion in taxes if parliamentarians failed to approve the sweeping enforcement measures proposed in the 2025-26 budget — as they were already cleared by the International Monetary Fund (IMF).

“I now request my colleagues in both houses of parliament to get the enabling clauses for enforcement measures passed, otherwise we would have to take Rs400-500bn additional tax measures,” the usually soft-spoken minister said at his post-budget press conference, hinting at potential resistance within the ruling party, coalition partners and other pressure groups.

While Mr Aurangzeb did not name specific provisions, he was apparently referring to expanded enforcement powers for the Federal Board of Revenue (FBR). These include the authority to block high-value financial transactions by non-filers — such as vehicle and property purchases, investment in securities and mutual funds, and opening certain prestigious bank accounts — along with powers to seal unregistered business premises, confiscate goods and recover taxes from firms, including those in the public sector.

At a recent special meeting, the National Assembly’s Standing Committee on Finance and Revenue raised objections to some of those measures introduced through the Tax Laws (Amendment) Ordinance 2025 last month and hinted at tight scrutiny in due course. “Legal backing will be critical to institutionalise compliance and sustaining revenue growth,” the finance minister asserted.

Mr Aurangzeb explained that of the Rs700bn additional revenues envisaged for the next fiscal year — on top of an estimated 12 per cent organic growth in taxes driven by inflation and economic activity — about Rs389bn is tied to enforcement measures, while Rs312bn stems from additional tax measures.

“These numbers are locked with the IMF,” Finance Secretary Imdadullah Bosal said, adding that the federal cabinet’s decision to increase government workers’ salaries by 10pc — up from the originally proposed 6pc — will have an additional fiscal impact of roughly Rs28bn.

He was responding to a question abo­ut whether talks with the Fund were com­plete or changes would ensue bet­ween the budget presented before and to be subsequently passed by parliament.

Both the finance minister and the finance secretary indicated that this additional fiscal impact was filled with a change in income tax rates for the salaried class. The first income tax slab — people earning between Rs600,000 and Rs1.2 million per year — was reduced from 5pc to 2.5pc, as announced by the finance minister in his budget speech, instead of the 1pc earlier envisaged (and printed in the Finance Bill).

Responding to a question, Mr Auran­gzeb said that, given Pakistan’s history, int­ernational stakeholders had also dou­bted the country’s ability to enforce tax laws effectively and insisted on results.

During the current year, “we have demonstrated practically that we can deliver”, with Rs400bn recoveries through enforcement. “We now have the trust and credibility,” the minister said, reiterating the need for legal provisions to continue enforc­e­ment or risk Rs400bn of more taxes.

Journalist walkout

The presser was marred by a walkout from journalists over the cancellation of a traditional technical briefing on the Finance Bill.

The protest turned into a full-blown boycott following a decision by officials to continue the live event in the presence of their own people alone. Information Minister Atta­u­llah Tarar, who was not in attendance, had to rush to the scene to acknowledge journalists’ grievances and convince them to return to the presser.

Mr Aurangzeb also defended sharp increases, some of them as large as 550pc, in the salaries of the speaker, deputy speaker, members of parliament and ministers.

He insisted the hikes sh­­ould be seen in the context that the salaries of the mi­­nisters had last been adju­s­ted in 2016, compared to annual increases in the wa­­­ges of employees in pu­­blic and private sectors in line with inflation and other factors. “Had these been adjusted on an an­­n­ual basis, there would have been no sudden jump.”

At the same time, the finance secretary indicated delays in the implementation of a contributory pension scheme for armed forces personnel with effect from July 1, 2025, as announced by the finance minister last year.

Mr Bosal said the contributory scheme for military employees was not an easy job and consultations had been taking place with the Ministry of Defence.

Both the minister and the secretary parried questions about the size of salary increases and special allowance for armed forces personnel annou­nced in the budget speech.

They also did not respond to repeated questions regarding the justification and increase in allocation of funds for parliamentarians’ schemes to Rs70bn, instead of the Rs50bn approved by the Annual Plan Coordination Committee.

The minister conceded the relief in tax rates for the salaried class, corporates and other sectors was minor but insisted it should be seen in the “direction of travel” that the government would keep on following as more fiscal space became available.

He insisted that the government showed acknowledgement that certain sections of society are overburdened. “This is a signal from the government to start moving in the right direction,” he said.

Responding to a question, Mr Aurangzeb said the federal government had called provincial nominations for the new National Finance Comm­ission, as the prime minister had already announced to call its meeting in August. He rejected the impression that the Centre could unilaterally delink population from resource distribution.

When questioned about the proposed debt servicing surcharge (DSS) on electricity, the finance minister did not recall he had announced any such thing in his budget speech.

However, in his budget speech, he had said the DSS would be used not only for servicing interest but also for repaying principal debt. He also proposed amendments to the Nepra Act to allow the federal government to raise the DSS beyond the current 10pc ceiling on a case-by-case basis.

Minimum wage

Asked why the government did not announce a minimum wage, the minister said the industry, in particular, and the private sector, in general, were not willing to pay even the previous minimum wage announced by the government.

He said Pakistan’s two international bonds are due for repayment in September and in April 2026, and the government was in a good position for their repayment.

Additionally, he ann­oun­ced plans to issue Panda bonds later this year to access China’s capital markets for diversification. The government also hopes to return to the US and European markets in 2026, contingent on improved credit ratings.

The minister stated that the government had eliminated additional customs duties on 4,000 tariff lines out of a total of 7,000 and reduced duties on an additional 2,700 lines as part of structural reforms aim­ed at aligning Pakis­tan’s trade and industrial policy with global standards.

These steps are part of a phased reform plan to simplify Pakistan’s tariff reg­i­me, aiming for an average rate of just over 4pc.

“Of these, around 2,000 tariff lines are directly linked to raw materials and intermediary goods used by the exporters,” he said. “This is the structural reform not taken in the past 30 years. This is a huge step, and we are committed to taking it forward gradually.”

Breathe Pakistan

The finance minister also expressed his gratitude to DawnMedia for its climate change initiative, Breathe Pakistan.

“I am very thankful to Dawn Group for the initiative it has taken on climate cha­n­­ge,” he said. “I have repeatedly said this (climate cha­nge) is an existential threat to Pakistan. Through Breathe Paki­st­an, you have taken it forward, and I commend you, your institution and your sponsors for highlighting this issue and its importance.”

He added, “It’s no longer just about the floods of 2022 — those of us living in Islamabad now experience windstorms and hailstorm every week. This never happened before. We are living climate change day in and day out. I want to sincerely thank your institution for leading the charge under Breathe Pakistan.”

Published in Dawn, June 12th, 2025