The announcement of Federal Budget 2025–26 was met with high hopes that it would serve as a roadmap to revive Pakistan’s faltering economy, reduce inflation and support its struggling industrial base. However, instead of offering relief and reform, the budget has become a source of concern and unease, particularly for the business community. The most worrying feature of the new fiscal plan is the extraordinary and unchecked powers that have been conferred upon the Federal Board of Revenue), shifting the focus from reform to repression.
BUDGET 2025-26
The announcement of Federal Budget 2025–26 was met with high hopes that it would serve as a roadmap to revive Pakistan’s faltering economy, reduce inflation and support its struggling industrial base. However, instead of offering relief and reform, the budget has become a source of concern and unease, particularly for the business community. The most worrying feature of the new fiscal plan is the extraordinary and unchecked powers that have been conferred upon the Federal Board of Revenue), shifting the focus from reform to repression.
Among the most disturbing aspects of this budget is the FBR's empowerment to access citizens’ and businesses’ bank accounts without requiring court permission. This not only infringes upon individuals' privacy but also reflects a deeply authoritarian approach to taxation. In addition, the FBR now has the authority to freeze bank accounts for recovery without providing prior notice, throwing businesses into uncertainty and chaos.
Even more alarming is the power granted to arrest taxpayers and conduct raids without due process or judicial oversight. These powers undermine entrepreneurs' legal rights and threaten to replace compliance with fear. In an environment where businesses are already reeling under the pressure of high operational costs, fluctuating exchange rates and energy shortages, such aggressive taxation policies only add to the instability.
Pakistan today needs an economy driven by confidence and collaboration, not by coercion. By transforming the tax authority into a policing entity, the government is effectively sending a message of mistrust to those who have long been the backbone of national revenue. This budget seems to view the business community not as partners in national growth but as suspects to be monitored and punished. The reality is that over 70 per cent of Pakistan’s total revenue is contributed by the private sector. Yet instead of appreciating this contribution, the government has adopted a tone of hostility that risks triggering capital flight, discouraging investment and driving more businesses into the undocumented sector.
What is equally disappointing is the complete disregard shown toward small and medium-sized enterprises (SMEs), which are the primary engines of employment and innovation. No meaningful incentives or relief have been extended to them. There has been no reduction in sales tax, which remains burdensome and complex. Despite constant appeals from the business community, energy subsidies for industries and exporters have been ignored.
The FBR’s own internal corruption and inefficiencies also remain unaddressed, with no credible roadmap for reform or restructuring. This signals a continued reliance on the same outdated and oppressive tax collection methods that have failed in the past.
The middle class and lower-income groups have also been neglected. There is no provision for an increase in the minimum wage, no subsidy on essential commodities and no relief from rising electricity bills. As inflation continues to erode household incomes, the burden of economic mismanagement is again being shifted onto the shoulders of the most vulnerable segments of society. While the government promotes this budget as a step toward documentation and transparency, the methods employed suggest otherwise.
Economic revival cannot be achieved through intimidation.It can only be secured through mutual trust, progressive leadership and fair economic governance. Pakistan needs a tax system that supports, not suppresses builds, not breaks
True reform cannot be achieved through force; it requires respect, fairness and trust. The tax system must be reoriented to encourage digital documentation through incentives, not threats. The focus should be on broadening the tax base rather than squeezing the same taxpayers repeatedly. Independent tribunals should handle tax disputes, not by the FBR acting as judge and executioner. Most importantly, businesses should be allowed to operate in an environment that respects their privacy and protects their financial dignity.
When we look around the region, we see more progressive and business-friendly approaches being adopted by our neighbours. India has successfully implemented a Goods and Services Tax system that simplifies compliance through a single-window platform. Bangla-desh has focused on offering energy subsidies to its export-led industries, boosting its textile sector to global prominence. Vietnam continues to attract global investors through corporate tax incentives and targeted support for the manufacturing and IT sectors. While these countries facilitate economic growth and welcome investment, Pakistan’s new budget seems designed to deter both.
The government had many better options at its disposal. It could have announced a relief package for SMEs, introduced tax holidays and startup grants and reduced GST to stimulate consumption and local manufacturing. Export-led sectors could have been supported with targeted energy subsidies. The FBR itself could have been transformed into a transparent, service-oriented body with robust internal accountability.
A whistleblower mechanism could have been introduced to fight corruption from within. Resources should have been allocated to the health, education and clean water sectors -- particularly in rural areas -- to create long-term human capital development.
Sadly, Budget 2025–26 represents not a vision for recovery, but a shift toward financial authoritarianism. If corrective steps are not taken, the country risks alienating its business community, discouraging innovation and deepening the already existing economic malaise.
The Lahore Chamber of Commerce & Industry calls upon the government to revisit the regressive provisions of this budget, roll back the excessive powers handed to the FBR and engage in a sincere dialogue with the private sector to formulate practical and growth-driven policies.
Economic revival cannot be achieved through intimidation. It can only be secured through mutual trust, progressive leadership and fair economic governance. Pakistan needs a tax system that supports, not suppresses -- builds, not breaks. Let us move toward a future where enterprise is celebrated and not criminalised -- and where policy reflects partnership, not persecution.
The writer is the senior vice-president of the Lahore Chamber of Commerce and Industry.
