Budget focuses on reforms, enforcement: Aurangzeb

ISLAMABAD: Finance Minister Muhammad Aurangzeb has termed the federal budget 2025-26 a “strategic document”, saying that the government is prioritising structural reforms, enforcement measures, and relief for lower-income groups to ensure equitable fiscal growth.

Speaking on Geo News programme ‘Aaj Shahzeb Khanzada Kay Sath’, the finance minister said the budget was designed with three key objectives — structural reforms, fiscal signalling, and enhanced enforcement. He described the reforms as Pakistan’s “East Asia moment,” stressing that tariff restructuring is critical to making the local industry competitive, boosting exports, and correcting the anti-export bias that has long plagued the economy.

He emphasized that targeted relief has been extended to the salaried class, particularly those in lower-income slabs. A surcharge, he said, had been imposed only on individuals earning over Rs10 million annually. “You could impose a 2pc or 5pc surcharge instead of 10pc but these decisions are trade-offs. We tried to give as much relief as possible to the lower-income groups within the fiscal space available,” he noted.

Aurangzeb explained that the government aimed to send a clear signal about the future direction of tax policy. Since assuming office, he said, no tax that had been increased had been reduced, and this perception needed to change. The budget, he maintained, signals that the government is now committed to creating stability, transparency, and predictability in the taxation framework. The minister said the country must now rely on enforcement to increase revenue and move towards the target of a 13.5pc tax-to-GDP ratio. He revealed that the government had already collected Rs390 billion through enforcement measures, a feat initially doubted by the International Monetary Fund (IMF).

“An almost similar enforcement-related revenue projection has been made for the next fiscal year, backed by the government’s performance track record,” he added. On the expenditure side, the finance minister said significant austerity measures had been taken. “Subsidies have been curtailed, while grants under the Benazir Income Support Programme (BISP) have been enhanced to protect the vulnerable. Operational costs of the government have been rationalised to keep expenditures steady,” he added.

He also addressed the government’s decision to increase public sector salaries by 10pc, a figure notably lower than last year’s 20-25pc hike. He said the increase was in line with headline and average inflation. He added that a deliberate effort was made to widen the differential in favour of lower salary brackets to provide more meaningful relief at the bottom. Acknowledging the government’s limited fiscal space, the finance minister said efforts were made to cushion the impact on the most vulnerable while urging the upper-income groups to understand and accept the need for short-term sacrifices.

He noted that currently, a salaried individual is required to fill out a 80-column tax form, even though their income is deposited directly into their accounts and taxes are automatically deducted. The government is simplifying the tax filing process by reducing the form to a 9-column version that will cover wealth, income, and tax, with auto-filled fields aiming to enable 70-80pc of salaried individuals to file taxes independently.

Commenting on the petroleum development levy, he clarified that it should not be viewed purely as a revenue-generating measure. Instead, it is linked to climate resilience and the broader climate change agenda. He also mentioned a new carbon levy, which is intended to discourage the use of fossil fuels and promote a shift towards electric vehicles and renewable energy sources.

On the NFC Award, Aurangzeb said that the National Fiscal Act had already been signed by the provinces and is built around revenue, expenditure, and governance. He confirmed that the government has requested formal nominations from the provinces for the NFC Commission. A meeting has been summoned by the prime minister to discuss possible revisions to the NFC Award. He said if we are to achieve sustainable growth, we must confront climate change and population.