EDITORIAL: The Finance Bill 2026 was passed by the National Assembly with 35 amendments, including extending sales tax exemptions on lease and import of aircraft and parts that the original bill extended only to Pakistan International Airlines (PIA).
The parliamentary committee members had pointed out that this inclusion is as per the law with officials from the Federal Board of Revenue (FBR) maintaining that they would need to get clearance from the International Monetary Fund (IMF).
In December 2024, the IMF had approved the 15 year sales tax and duty exemption on lease or purchase of aircraft, spare parts and aviation equipment as part of the Sales Purchase Agreement – an exemption that government sources at the time claimed would raise PIA’s sale price to around 350 billion rupees.
In December 2025, PIA was sold for 135 billion rupees to a consortium of leading local investors with a 75 percent controlling share with the remaining 25 percent of government shares acquired for 45 billion rupees though the government received only 10.1 billion rupees.
While climate support levy, another IMF condition under the Resilience and Sustainability Facility (RSF), remains yet provisions relating to late payment surcharge and recovery have been dropped, zero excise on electric cars and SUVs imported in CBU condition having value as determined under section 25 of the Customs Act 1969 not exceeding 75,000 US dollars, the manufacturer apart from any other liability be liable to pay 3 percent value-addition tax of imports on an ad valorem basis along with default surcharge in case the imported goods are supplied in the same state whether in the same packing, repacked or in bulk. And income tax exemption will be available on any income derived from a private equity or venture capital fund registered under private funds regulations 2015 if not less than 90 percent its accounting income for that year as reduced by accumulated losses and unrealized capital gains is distributed by the private equity or venture capital fund to its unit or certificate holders or shareholders.
All 35 amendments with major revenue implications would have to be run past the IMF staff to ensure that the staff level agreement on the pending fourth review of the ongoing Extended Fund Facility programme and the third review of RSF would be reached, triggering the tranche releases. In case of Fund insistence that the revenue loss be met the government can walk back some of these amendments, which is a challenging task at best. What is more likely is a mini-budget based on the contingency measures already agreed, measures that envisage higher sales tax on some items – a tax whose incidence on the poor is greater than on the rich– or slash expenditure.
It is disturbing that yet again the discussion during the parliamentary (Senate and National Assembly) committee meetings on the budget focused on individual tax measures rather than challenging expenditure in general and current expenditure in particular. The mark-up component of current expenditure is budgeted to rise to 8.05 trillion rupees (based on the assumption that the policy rate would not rise), pension outlay rising to 1.16 trillion rupees indicating that, as expected, reforms are not likely to kick in till those recruited in the last two years reach retirement age, and a 7 percent raise in salaries.
The current expenditure is budgeted at a high of 17.49 trillion rupees against the revised estimates of last year at 15 trillion rupees – a rise of 16.5 percent well above inflation, which is difficult to justify at a time when fiscal space remains extremely narrow.
Copyright Business Recorder, 2026