ISLAMABAD:
Finance Minister Muhammad Aurangzeb on Wednesday cautioned that the government may be compelled to impose up to Rs500 billion worth more new taxes if the National Assembly did not allow it to ban economic transactions by ineligible persons.
The minister also made a paradoxical comment where he defended the decision to keep the minimum monthly wage unchanged at Rs37,000 but advocated an annual increase in salaries of the parliamentarians to adjust for the impact of inflation.
The warning about a mini-budget before the approval of the new budget came just a day after the finance minister proposed roughly Rs432 billion worth of new taxes, which targeted the digital economy, solar panels, middlemen’s cars and fuel, including that used in agriculture.
He made the remarks during a post-budget press conference where he expanded upon the federal budget proposed for the new fiscal year.
If the law to ban economic transactions is not passed and the enforcement measures are not implemented, we will have to impose Rs400 billion to Rs500 billion worth of new taxes, repeated by the finance minister twice to register his point.
“We have two ways — either we ensure enforcement or we introduce additional measures of up to Rs400 billion to Rs500 billion. This is why we will go to the parliament to help us out with the enabling amendments and legislation”, he added.
He said that the International Monetary Fund has accepted the government’s point of view that it can get Rs389 billion additional in the next fiscal year through enforcement measures, which is not possible without new legislation.
Transactions to be banned
In the budget, the government has proposed restrictions on economic transactions by ineligible persons lacking sufficient financial resources. These restrictions include: a ban on booking, purchasing, or registering motor vehicles; a ban on registering, recording, or attesting the transfer of immovable property; a ban on selling securities — including debt securities or mutual fund units — to ineligible persons; and a ban on opening or maintaining current, savings, or investor portfolio securities accounts.
Only individuals holding 130% of the value in cash and equivalent assets — comprising local or foreign currency, fair market value of gold, net realisable value of stocks, bonds, receivables, or any other cash-equivalent asset — will be eligible to buy such assets.
Rs37,000 minimum wage appropriate
In a surprising statement, the finance minister defended the decision to freeze the minimum wage at Rs37,000 per month — or Rs1,423 per day, excluding holidays.
“Go to the industries and get their feedback on the minimum wage. I think we are in a good place,” said Aurangzeb.
However, he also defended the substantial hike in salaries of the Senate chairman and deputy chairman, and the National Assembly speaker and deputy speaker, raised sixfold to Rs1.3 million per month.
He said their salaries were being adjusted after nine years. Like the annual increment in government employee salaries, parliamentarians’ pay should also increase, he recommended.
Media protests for its rights
At the outset of the press conference, reporters voiced concerns over not receiving a technical briefing from the Federal Board of Revenue (FBR) on the Finance Bill 2025 on Tuesday. They walked out in protest and returned only after Information Minister Attaullah Tarar and FBR Chairman Rashid Langrial acknowledged that such a briefing should have been given as per tradition.
Finance Minister Aurangzeb later acknowledged the “worry” caused to reporters and said he “regretted if there was anything of the sort”.
Cash on delivery disparity
The government’s move to charge 2% tax on online shopping up to Rs20,000 — while charging only 0.25% for purchases exceeding that amount — is likely to further encourage cash-on-delivery for high-value transactions.
Dr Najeeb, FBR Member Policy, explained that while the value of goods in such transactions is high, the profit margins are low, hence the proposed lower tax rate of 0.25%.
Under the proposed rates, tax on a Rs20,000 transaction will amount to Rs400, but for Rs21,000 it will drop to Rs52.
Dr Najeeb noted that grocery items have lower margins but are taxed at higher rates than electrical goods. “We did not follow previous policies where everyone suffered under the same category,” he added.
Pakistan’s East Asia moment
Finance Minister Aurangzeb asserted that reducing import duties would move Pakistan toward an export-led economy. He emphasised the significance of tariff reforms under the National Tariff Policy.
“People ask us if revenue will decline. But if we are to take this country forward toward an export-led model, this is the discussion we must have,” he said.
The minister noted that additional customs duties were eliminated from four tariff lines and reduced for 2,700 more, all linked to raw materials intended to benefit exporters.
“This is an East Asia moment for Pakistan. Whatever was available in the fiscal space reflects the direction of travel. We’ve tried to reduce tariffs. This is not the eventual end state,” he remarked.
On the increased tax rate for the sale of plots, Aurangzeb said the selling side still receives capital gains, but the buying side should receive some relief.
Finance Secretary Imdad Ullah Bosal stated that there was no more fiscal space to reduce expenditure, and savings from downsizing the government were limited to the abolishment of vacant positions.
Responding to a question about delinking population statistics from the National Finance Commission (NFC) award, Aurangzeb insisted, “Everything will be done in consultation with provinces.”
Earlier this week, the finance minister had said that the population should be delinked from the NFC formula to address 2.6% annual population growth.
“Nothing will be done without the provinces, including the national fiscal pact,” he added.
To a question about the impact of reducing the income tax surcharge by 1%, which still leaves it at 9%, on brain drain, Aurangzeb said the government had set a rare direction, one indicating that “anything going up is, within a year, going down”.
“The things that had never been reversed before have now been put into reversal – but that’s not the eventual end state,” he said.
He clarified that the government is trying to send a message to sectors facing undue burden, particularly the formal sector, that it is “serious”. “This is just signalling, from my perspective, in the right direction,” he said.
When asked about the rationale for imposing an 18% sales tax on imported solar panels, FBR Chairman Rashid Langrial explained that panels were being imported either fully or partially assembled.
Those adding value locally were already taxed at 18%, while fully assembled imports were not, putting local assemblers at a disadvantage.
“We also closed the door for future local assembly, so this was not an option. We have to create a level playing field,” Langrial said, asserting that incentives were no longer needed, given the falling cost of technology.
He estimated that the 18% tax on solar panel imports would increase the payback period by only two months, from 18 to 20 months.
Eurobond repayments
On bond repayments, the finance minister said the first instalment of $500 million worth of Eurobonds is due in September, followed by the next in March. “We are prepared and willing to pay,” he said.
“With the international credit rating improving, we want to access the euro and US dollar markets, which is expected in 2026, but certainly not this calendar year,” Aurangzeb added.
