Senate, NA finance committees raise concerns over 'ambitious' revenue target for FY27

The standing committees on Finance and Revenue of the Senate and National Assembly expressed concern on Saturday over the government’s “ambitious” revenue target in the upcoming fiscal year despite a shortfall in tax collection in outgoing FY2025-26.

The incumbent government unveiled on Friday its third budget, aiming to collect Rs15.26 trillion through the Federal Board of Revenue (FBR) in FY27, an increase of over 8% compared to Rs14.13 trillion proposed in outgoing fiscal year. However, the government failed to achieve the target for FY26 as the FBR collection stood at around Rs13 trillion.

“The Federal Budget FY2026–27 remains heavily focused on revenue generation and fiscal consolidation, while offering limited measures to stimulate economic growth, investment, and employment,” committee chairman Syed Naveed Qamar said during the panel meeting, according to a statement from NA Secretariat.

He expressed concern over the “continued practice of setting ambitious revenue targets despite repeated shortfalls in tax collection”.

Qamar further questioned the rationale behind imposing additional taxation on citizens while simultaneously maintaining large primary surpluses and compressing development expenditure under International Monetary Fund (IMF) programme requirements.

During the briefing, the committee was informed that the budget had been formulated within the framework of Pakistan’s ongoing IMF orogramme, with fiscal consolidation and achievement of primary surplus targets serving as the principal policy objectives.

The government has projected gross domestic product (GDP) growth of 4% and inflation of 8.2% for FY27, while total federal expenditure is estimated at approximately Rs18.7 trillion.

“Members noted that FBR has historically struggled to achieve its revenue targets and expressed reservations regarding the feasibility of the projected increase in tax collection.

“Concerns were also raised regarding the heavy reliance on enforcement measures rather than broadening the tax base through meaningful structural reforms.”

Meanwhile, the committee discussed the requirement for substantial provincial fiscal surpluses under the IMF programme and questioned the policy rationale of collecting additional revenues from taxpayers while restricting public expenditure and development spending.

“Members observed that excessive emphasis on fiscal surpluses may undermine economic growth and limit the government’s ability to address pressing social and developmental needs.”

The NA panel also reviewed the composition of federal expenditure and noted that debt servicing continued to consume the largest share of current expenditure, exceeding Rs8 trillion.

The committee members emphasised the need for a comprehensive debt management strategy aimed at reducing borrowing costs and creating greater fiscal space for development priorities.

They further reviewed tax policy measures announced in the budget, including relief for salaried taxpayers, reductions in selected customs duties, incentives for exporters, and reforms relating to the property sector.

“Particular concern was expressed regarding the newly proposed retailer tax scheme where the committee observed that the scheme could create distortions within the tax system, discourage compliance under the normal tax regime, and potentially erode the existing tax base.”

“Sustainable economic growth requires comprehensive reforms aimed at broadening the tax base, improving expenditure efficiency, strengthening debt management, and promoting investment and productivity,” Qamar said.

The meeting was attended by Zeb Jaffar, Muhammad Usman Awaisi, Dr Nafissa Shah, Hina Rabbani Khar, Sharmila Faruqi, Ali Jan Mazari, Dr Mirza Ikhtiar Baig, Muhammad Javed Hanif Khan, Arshad Abdullah Vohra, and Shahida Begum, MNAs.

Meeting of Senate Standing Committee on Finance and Revenue

Meanwhile, the Senate Standing Committee on Finance and Revenue also met on Saturday, where FBR officials informed the committee that the prime pinister had established a Tax Policy Office to separate tax policy formulation from tax administration.

Senator Abdul Qadir expressed concern that the super tax was “discouraging investment in Pakistan”.

Senator Sherry Rehman observed that provincial tax collection performance was improving and, in some areas, showing better results than the FBR.

She further stated that it remained uncertain whether the FBR would be able to achieve its annual tax collection targets.

The Senate committee also reviewed a proposal seeking authority for the FBR to impose fines for violations of customs laws.

Senator Anusha Rehman opposed the proposal, stating that such authority belonged to the government and should not be delegated to the FBR board. She informed the committee that the authority had instead been placed with the Finance minister, according to a statement from Senate Secretariat.

The panel also considered an FBR proposal to outsource the auction process of seized goods to third parties. Officials maintained that the private sector should conduct auction activities instead of customs officers. Following deliberations, the committee approved the proposal.

Also present at the meeting, Finance minister Muhammad Aurangzeb said investors required predictability and consistency in government policies. He emphasised that all stakeholders must work together to move the economy forward and announced that economic consultations would continue throughout the year rather than ending on June 30.

Aurangzeb informed the committee that the government had initiated measures aimed at transitioning the economy from stability towards sustainable growth. He stated that the Parliament had approved the separation of tax policy formulation from tax collection functions and described the establishment of the Tax Policy Office as a major structural reform.

Finance minister further informed the committee that the Tax Policy Office would maintain continuous engagement and consultations with traders and business representatives throughout the year to ensure greater policy consistency, stakeholder participation and economic confidence.

The committee will continue its clause-by-clause scrutiny on Sunday of the Finance Bill 2026-27 and formulate recommendations for submission before the Senate, the Senate statement read.

What did govt propose in budget FY27?

Pakistan government has taken enforcement and tax policy measures of nearly Rs650 billion including rationalisation of penalty regime, Federal Excise Duty (FED) on luxury vehicles and Naphtha, solvent oil and Rs70 billion worth measure to charge sales tax on the basis of printed retail price basis on 21 items to meet the target of Rs15.26 trillion for FY27.

The enforcement and administrative measures are expected to fetch additional Rs400 billion while taxation measures to bring additional revenue of Rs250 billion in the next fiscal year.

With tax collection of Rs13 trillion till June 30, 2026, the FBR will go close to Rs14.6 trillion with the help of nominal growth (real GDP growth of 4% plus inflation of 8.2%) in the next budget while remaining Rs650 billion are expected to be materialised with the combination of taxation, enforcement and administrative measures.

Last week, the government also introduced a fixed tax scheme for small retailers.

The scheme would be applicable to retailers having an annual turnover of Rs200 million or less. Under the scheme, a 1% tax would be imposed on the retailer’s annual turnover.

“With Holding Tax (WHT), which is already deducted, will be adjusted in this tax,” said Minister of State Bilal Azhar Kayani during a press conference. “However, at the time of form submission, the retailer will have to pay at least Rs25,000,” he said.