• Trade associations see relief ‘selective’ as costly energy to continue hindering economic growth
• Term omission of Final Tax Regime a setback for industry

KARACHI: Business leaders offered a cautious welcome to the Rs18.7 trillion federal budget, describing it as a mix of relief measures and missed opportunities.

While acknowledging steps aimed at easing the tax burden on businesses and salaried individuals, they argued that the budget falls short of presenting a coherent strategy for export growth, industrial revival and long-term economic expansion.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh said the economy had shown signs of stabilisation, citing GDP growth of 3.7pc, a fiscal deficit of 0.7pc of GDP, and a 23pc decline in public debt-servicing costs.

He welcomed several measures incorporated from FPCCI proposals, describing them as a partial shift towards a growth-oriented model. These include the abolition of Capital Value Tax on foreign assets, the removal of the Federal Excise Duty on international business-class travel, the elimination of super tax on income slabs up to Rs500 million, and a reduction in the rate from 10pc to 8pc for higher incomes. Exporters have been exempted from super tax, while tax rates for salaried individuals have also been reduced.

Other measures welcomed by the business community include the extension of the 0.25pc final tax on IT exports until June 2029, a 50pc reduction in withholding tax for filers in the construction sector, a one per cent fixed sales tax scheme for small retailers and a revised 1.25pc minimum tax for exporters.

Despite these steps, Mr Sheikh expressed concern over weak investment and savings indicators. The investment-to-GDP ratio remains at 14.38pc, while the savings rate has fallen to 14.13pc. He also highlighted a rise in urban poverty from 11pc to 17pc.

He questioned the Federal Board of Revenue’s tax collection target of Rs15.2tr and the petroleum levy target of Rs1.7tr, warning that they could intensify inflationary pressures.

Several FPCCI proposals were omitted from the budget, including the restoration of the Final Tax Regime (FTR) for exporters, reductions in corporate and turnover taxes, the abolition of the minimum tax regime, and broader digitalisation reforms.

“The next phase of reforms must focus on productivity, export diversification and reducing the cost of doing business,” he said.

Burdensome for taxpayers: OICCI

Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M. Abdul Aleem described the budget as a restrained but serious effort prepared under fiscal and external pressures.

“This is not a perfect budget that will magically bring foreign direct investment into the country, but in difficult times it is not an unserious one,” he said.

While acknowledging FBR’s achievement of collecting Rs13tr in revenue, he noted that most of the burden continued to fall on compliant taxpayers, organised businesses and salaried individuals. He criticised the unchecked growth of the informal economy, pointing out that cash circulation had risen from Rs9tr to Rs12tr within a year.

Mr Aleem welcomed the partial rationalisation of the super tax, lower withholding and advance taxes on exports and reduced advance tax rates in the real estate sector. He also praised the proposed National Faceless Assessment Centre, which is expected to reduce direct interaction between taxpayers and tax officials.

However, he regretted the absence of measures to restore sales tax status or introduce zero-rating for oil refineries and marketing companies, saying the issue was holding back potential investments of $6-10 billion.

He also criticised the continuation of minimum and alternate minimum taxes, arguing that they impose liabilities based on turnover rather than profits. The lack of a time-bound mechanism for sales tax and income tax refunds remained another major concern for investors, he added.

Export sector ignored: KCCI

Businessmen Group Chairman Zubair Motiwala termed the budget ‘neither good nor bad’, saying it offered no major incentives capable of boosting exports or improving Pakistan’s competitiveness.

He expressed disappointment over the government’s refusal to restore the FTR for exporters. Instead, the withholding tax rate was reduced from 2pc to 1.25pc and converted into a minimum tax, leaving exporters within the normal taxation framework.

“This defeats the very objective of FTR. Exporters wanted certainty and ease of doing business, but that objective has not been achieved,” he said.

Mr Motiwala welcomed the reduction in super tax, but criticised the budget’s silence on industrial energy costs and circular debt.

He questioned how the government expected to achieve its ambitious revenue target without creating a more business-friendly environment and broadening the tax base.

“It is a budget which neither hurts nor heals,” he said.

Fails to support manufacturing

SITE Association of Industry President Abdul Rahman Fudda said the budget fell well short of the manufacturing sector’s expectations.

“Industry needed a breakthrough budget; it received an incremental one,” he remarked.

He said export-oriented sectors, including textiles, engineering, chemicals and processed goods, were disappointed by the government’s decision not to restore the FTR. While the reduction in export withholding tax provided some relief, it was insufficient given the sector’s overall tax burden.

Mr Fudda identified three major unresolved issues: uncompetitive electricity tariffs, the expansion of the Third Schedule of Sales Tax, which strains working capital, and a stricter penalty regime that disproportionately affects compliant businesses.

“The formal industrial sector continues to bear the burden of higher taxes, costly energy and delayed refunds while being expected to compete globally,” he said.

Challenges persist for agriculture

All Pakistan Fruit and Vegetable Exporters Association Patron-in-Chief Waheed Ahmed said the agriculture sector had largely been ignored despite facing serious challenges.

He welcomed the reduction in minimum and advance taxes on exports, the allocation of Rs88bn under the Export Refinance Scheme, and the abolition of the super tax on income between Rs150m and Rs500m.

However, he criticised the decision to retain export taxes and to exclude them from the Fixed Tax Regime. He also noted the absence of incentives for alternative energy, which could help reduce production costs and improve competitiveness.

Mr Ahmed urged the government to adopt practical measures to support agriculture and horticulture, arguing that the sector’s export potential could not be realised without meaningful policy support.

No roadmap for industrial growth: LCCI

The Lahore Chamber of Commerce and Industry (LCCI) termed the budget 2026-27 a balanced financial plan for economic stabilisation and documentation, while emphasising the need for greater focus on investment-led growth, industrial expansion and employment generation.

Reacting to the proposals, LCCI President Faheem-ur-Rehman Saigol, SVP Tanveer Sheikh and VP Khurram Lodhi noted that certain key sectors critical to the country’s long-term economic growth require greater attention.

They observed that the budget lacks a comprehensive roadmap for industrial growth, SMEs, agriculture and the IT sector, which are among the major drivers of exports, investment and job creation.

The LCCI office-bearers also expressed concern that the allocation of Rs109bn for dams and water reservoirs may not be sufficient to address the growing water security challenges.

They further noted the ambitious tax collection target of Rs15.264tr and stressed that revenue objectives should primarily be achieved through expansion of the tax base rather than increasing the burden on existing taxpayers.

The chamber also suggested that, alongside social protection initiatives, greater investment should be made in skills development and human capital to create sustainable employment opportunities.

They welcomed the abolition of Section 7E, the reduction in property transaction taxes, the cut in tax rates for salaried individuals, and various initiatives to improve tax administration and documentation.

Published in Dawn, June 13th, 2026