Budget FY27 balances tax cuts, new levies

June 12, 2026 (MLN): Pakistan has set an ambitious tax collection goal of PKR15.264 trillion for the Federal Board of Revenue (FBR) in FY2026-27, accompanied by a mix of revenue-enhancing measures and targeted tax relief for individuals and businesses.

While presenting the federal budget for FY27, the government outlined a comprehensive taxation framework designed to boost revenue generation, widen the tax net, and support economic activity in selected sectors.

FBR officials stated that approximately PKR650 billion is expected to be generated through improved enforcement, compliance initiatives, and administrative reforms during the upcoming fiscal year.

Among the key relief measures, the government proposed lower tax rates for salaried individuals across various income brackets. In addition, the extra 10% surcharge previously applicable to higher-income salaried taxpayers is proposed to be withdrawn.

To encourage activity in the property market, the budget includes proposals to reduce withholding taxes on real estate transactions, making the purchase and sale of property more affordable.

The government has also suggested substantial cuts in the Federal Excise Duty (FED) on international business-class travel. Under the proposal, passengers flying to the United States would pay PKR50,000 in FED instead of the existing PKR350,000, while business-class travelers heading to Europe, Australia, and Far Eastern destinations would see the duty reduced from PKR210,000 to PKR40,000.

On the other hand, higher taxation has been proposed for luxury vehicles. Electric vehicles valued above PKR20 million would fall under the FED regime, while those priced beyond PKR30 million would attract a 40% excise duty. Similarly, vehicles with engine capacities exceeding 3,000cc are proposed to face an FED rate of 81%.

The budget also introduces tax measures for digital content creators. Individuals earning income through social media platforms would be permitted to claim deductions of up to 30% of qualifying expenses before calculating taxable income.

For businesses, the government has proposed easing the burden of Super Tax by eliminating it for companies with annual earnings of up to PKR500 million.

A separate proposal seeks to impose a 15% tax on professional services, including those offered by doctors, lawyers, consultants, and other practitioners.

In the tobacco segment, the government plans to raise the FED on e-liquid used in electronic cigarettes from PKR10,000 per kilogram to PKR16,500 per kilogram, reflecting its effort to increase revenue from tobacco-related products.

To further expand the sales tax base, authorities have proposed levying sales tax on the printed retail price of 21 categories of goods. The measure is projected to contribute around PKR50 billion in additional revenue during FY27.

Overall, the proposed taxation measures are aimed at strengthening fiscal resources, enhancing tax compliance, and supporting the government's broader economic reform objectives while extending selective relief to taxpayers and the corporate sector.

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