Finance bill 2026 and the common man!

Finance Bill 2026 passed through the National Assembly amidst heated discussions and it is evident that the government has been trying to strike a balance between servicing its colossal debt and fulfilling defence requirements within the framework of fiscal rules of the IMF.

As such, it brings relief to a number of sectors and individuals, however, also implies additional challenges and burdens for others, especially small businesses and the common man who is struggling with the growing prices and low real income.

Selective Relief Measures

First of all, it seems fair to discuss the positive changes that will be introduced by the Finance Bill 2026, especially for the salaried middle class and some segments of business. In particular, there will be a reduction in income tax slabs in several brackets. Moreover, the 9% surcharge for high-income individuals is abolished, while the 35% maximum tax will apply only when the annual income exceeds Rs 7 million. In addition, there will be a 7% salary increment for federal employees and increased BISP allocations up to Rs 838 billion.

The Finance Bill 2026 provides certain measures that will make the conditions better for businesses and their development in Pakistan. Thus, for instance, the abolishment of Section 7E (deemed rental income on property), reduction of advance tax in the real estate transactions, some corporate tax measures, super tax reduction for numerous firms, and incentives for exporters and IT activities will make the business more favorable.

There are certain provisions in the Finance Bill 2026 related to smartphone users in Pakistan, which will bring some relief. Namely, there will be a decrease in the regulatory duty for importing smartphones by 20%, and some measures regarding payment of heavy PTA taxes in installments and change in mid-range slab rates. The introduction of such measures will allow making expensive premium smartphones available to professionals and students in Pakistan, even though locally assembled smartphones do not gain anything from them.

Additional Challenges For Businesses

Nevertheless, the bill introduces a range of measures that will create additional burdens for businesses operating in Pakistan. First, the requirement for mandatory electronic invoicing and installation of a monitoring system with tax stamps and video analytics will be another challenge for businesses that have no digital infrastructure or work informally. Second, the bill introduces a 5% withholding tax on the incomes from social media and other digital creators’ content that will be collected from the banks, thus stifling the business of many young entrepreneurs.

In addition, the sales tax will be increased for certain categories of packaged retail goods (oils, dairy, cosmetics, plastics, and others). Moreover, higher taxes on petroleum products will result in increased input prices and higher logistics costs. Consequently, businesses (retailers, distributors, transport companies) will try to pass such costs on to the consumer, which means increasing inflation rate in the country.

Thus, large corporations and exporters may handle all changes in regulations, however, smaller enterprises will face difficulties and will either disappear or work informally. The high fiscal revenue target of Rs 15.264 trillion leaves no chance for easing the costs for business in any way.

Additional Burden For the Common Man

As far as common man is concerned, it can be said that the situation will get worse rather than better. Namely, because of the increased petroleum tax, the cost of fuel and transport will rise, which will affect the commute costs, food prices, and delivery of goods. Sales tax expansion for packed retail goods will cause an increase in the cost of these goods, affecting those budgets that are already under pressure of the growing inflation rate.

Moreover, despite the increase of the BISP beneficiaries’ stipends, other people working in the informal segment of the economy will not gain anything from the mentioned measures related to the income tax rates of salaried workers.

Although these measures may lead to formalizing the informal economy in the future, it will cause some obstacles for small entrepreneurs now. The smartphone relief measures will be beneficial for professionals and students, nevertheless, compared to the depreciation of the rupee and the high taxation of imported goods, they are not important.

Missed Opportunity For Bold Changes?

In general, it should be admitted that the Finance Bill 2026 prefers revenue assurance to reforms aimed at economic growth. As a result, debt servicing will remain the largest item in the budget, which does not give any fiscal space for investments in infrastructure, education, or industry to stimulate businesses and citizens.

There are some measures that seem promising for some businesses and individuals (relief for property, some incentives for IT sector, and other corporate measures), however, they are overshadowed by additional costs and burdens for the informal segment of the economy, for ordinary consumers, and for SMEs.

The informal economy, SMEs, and emerging middle class needed more simplified taxes and measures to boost the job creation process. Instead, they have received a cautious reform, which will worsen their conditions. Only broadening the tax base by taxing elites and untaxed sectors of the economy along with reducing distortions will allow making the necessary changes.

Disclaimer: The views expressed here are solely the author’s and do not necessarily reflect the opinions and beliefs of ARYNews or its management.