Pakistan Budget 2025-26: Rs500bn Tax Hike Risk
Finance Minister Aurangzeb warns of a potential Rs500 billion tax hike in the 2025-26 budget if enforcement measures fail to pass parliament. This impending fiscal adjustment, backed by the IMF, is a crucial aspect of Pakistan’s financial strategy. The impact of this is already sparking debate, with lawmakers questioning salary increases and the progress of the contributory pension scheme. News Directory 3 provides key insights into the implications of these decisions, detailing the proposed changes in income tax rates and the government’s debt servicing plans. Discover what’s next in the evolving financial landscape.
Pakistan Budget: IMF-backed tax Measures Face Resistance
Updated june 12,2025
Finance Minister Muhammad aurangzeb cautioned Wednesday that the government may need to impose an additional Rs400 to 500 billion in taxes if parliament does not approve enforcement measures in the 2025-26 budget. These measures have already been cleared by the International Monetary Fund (IMF).
Speaking at a post-budget press conference, Aurangzeb hinted at potential resistance within the ruling party and coalition partners.He urged parliamentarians to pass the enabling clauses for enforcement measures, emphasizing the need to avoid further tax increases.
While Aurangzeb did not specify the provisions, he appeared to be referring to expanded enforcement powers for the Federal Board of Revenue (FBR). These powers include blocking high-value financial transactions by non-filers and sealing unregistered businesses.
The finance minister stressed that Rs389 billion of the Rs700 billion in additional revenues for the next fiscal year depends on these enforcement measures. Finance Secretary Imdadullah Bosal confirmed that these revenue numbers are locked with the IMF.
Bosal also noted that the federal cabinet’s decision to increase government workers’ salaries by 10%, instead of the initially proposed 6%, will add approximately Rs28 billion to the fiscal impact. This impact was offset by adjusting income tax rates for the salaried class.The income tax rate for the first slab (Rs600,000 to Rs1.2 million per year) was reduced from 5% to 2.5%.
Aurangzeb defended the need for these measures, citing Pakistan’s history and the insistence of international stakeholders on tangible results. He highlighted the Rs400 billion recovered through enforcement during the current year, stating that this has built trust and credibility.
The press conference faced disruption when journalists walked out in protest over the cancellation of a technical briefing on the Finance Bill. Data Minister Attaullah Tarar intervened to address their concerns and persuade them to return.
Aurangzeb also defended notable salary increases for officials, including lawmakers and ministers, arguing that these salaries had not been adjusted as 2016. he contrasted this with annual wage increases for public and private sector employees.
Bosal indicated potential delays in implementing a contributory pension scheme for armed forces personnel, originally announced for July 1, 2025. He explained that consultations with the Ministry of Defense are ongoing.
Officials sidestepped questions regarding the size of salary increases and special allowances for armed forces personnel, as well as the increased allocation of funds for parliamentarians’ schemes.
Aurangzeb acknowledged that tax relief for various sectors was minor but emphasized that it signals a move in the right direction as more fiscal space becomes available.