ISLAMABAD:
The Senate on Thursday approved a series of recommendations for the 2026-27 budget, including a 15% increase in salaries for government employees, the restoration of frozen medical benefits for employees and pensioners, higher taxes on luxury assets and large motor vehicles, and permission for foreign visitors and residents to bring alcohol into the country for personal use.
The recommendations were adopted during a Senate session chaired by Senate President Yousaf Raza Gillani after House Standing Committee on Finance Chairman Saleem Mandviwalla presented the committee’s report on the Finance Bill.
Among the key recommendations, the Senate proposed increasing the salaries of federal government employees by 15% and restoring frozen medical benefits for both active employees and pensioners. He also recommended reducing tax rates for salaried and low-income people to provide relief amid rising costs of living.
The House proposed a reduction in the General Sales Tax (GST) on food, medicines, educational supplies and agricultural inputs, while recommending allocation of funds to reduce electricity tariffs. In a notable recommendation, the Senate suggested allowing foreign residents and visitors to bring alcohol for personal consumption.
The recommendations also called for zero-rated taxes and tariffs on fertilizers, seeds, pesticides, diesel and farm machinery to support the agricultural sector. The Senate also proposed increasing allocations for public hospitals, primary health care services, higher education funds and scholarship programs.
The report calls on the government to reduce non-development expenditure, simplify the tax regime for small and medium enterprises, review proposed tax measures on commodities and the salaried class, and broaden the overall tax base.
The Senate also recommended the removal of additional fees and taxes imposed through electricity bills on household and low-income consumers. He proposed extending tax exemptions available to IT exporters and self-employed workers for another 10 years.
To expand revenue generation, recommendations included increasing taxes on vehicles with engine capacities greater than 3,000 cc, luxury properties and non-productive assets. The Senate also called for reducing indirect taxes on essential goods and establishing a mechanism to transfer development funds to elected local governments.
The chamber also recommended comprehensive tax and documentation measures for luxury retail businesses, real estate transactions and luxury transactions carried out by non-filers.
Regarding property taxes, the Senate proposed that lower property tax rates should continue to be available only to first-time homebuyers, while property taxes should continue to apply to investors who purchase second homes or own land for investment purposes.
Concluding the budget debate, Finance Minister Muhammad Aurangzeb said the government had not been able to achieve its GDP growth target due to global and regional economic conditions. However, he said reform measures in various sectors had continued.
The Minister told the House that advance tax on the export sector had been abolished, various margin rates had been reduced and tax relief had been given to the construction sector.
He said no new taxes had been imposed on the IT sector, while steps were being taken to create a better ecosystem and training opportunities for freelancers.
Aurangzeb said the government had provided small farmers with easier access to loans, allocated Rs 10 billion under the Youth Loan Scheme and abolished import taxes on farm machinery.
He said a simplified scheme was being introduced to bring small traders into the tax net. At the same time, the Federal Board of Revenue (FBR) was being digitized to reduce human intervention and improve institutional efficiency.
The Finance Minister said the government was taking steps to move the economy towards self-sufficiency and had demonstrated its ability to address flood-related challenges through its own resources.
On the occasion, Mandviwalla said this was the eighth consecutive budget for which he was submitting Senate recommendations as chairman of the finance committee.
He said the budget had been presented in a war situation and noted that relief had been provided to wage earners through reductions in income taxes. He also called for additional measures to promote solar energy and proposed abolishing taxes on credit cards and ATMs.
Mandviwalla said the finance committee had submitted 108 recommendations on the budget, while the Senate Standing Committee on Planning had submitted 15 recommendations, taking the total number of Senate recommendations to 123.
He noted that allocations for health and education remained very low and said additional burdens had been placed on existing taxpayers. He reiterated the committee’s recommendations for a minimum 15% increase in salaries for government employees, lower taxes on food products and agriculture, and tax exemptions for books, notebooks and pencils.
He also said climate-related taxes should only be used for environmental improvement measures.
Senate President Gillani said the chamber had held detailed discussions on the budget for four consecutive days, with 56 senators participating in the debate. He said the finance and planning committees had worked continuously to prepare 123 budget recommendations, which would now be sent to the National Assembly for consideration.
Once the procedure was completed, the Senate session was suspended indefinitely.
