ISLAMABAD: Finance Minister Muhammad Aurangzeb delivered a stern message to parliament on Thursday, declaring an end to Pakistan’s cycle of tax amnesties and exemptions as lawmakers rejected key budget proposals including a controversial carbon levy.
The parliamentary standoff unfolded during clause-by-clause review of the Finance Bill 2025-26, revealing deep divisions over taxation policies and their economic impact.
Carbon Levy Sparks Heated Debate
The proposed carbon levy on petroleum products faced fierce opposition from both Senate and National Assembly committees, who branded it an unfair burden on citizens.
Senator Sherry Rehman led the charge, arguing that carbon pricing requires dedicated legislation rather than inclusion in the finance bill. “This isn’t climate finance – it’s taxing ordinary Pakistanis,” she asserted.
Finance Ministry officials revealed the levy aimed to generate Rs45 billion, with Rs18 billion going to provinces if converted to a tax. Senator Mohsin Aziz warned the measure might violate Supreme Court rulings on taxation powers.
The committees ultimately rejected the levy along with proposed tiered taxes on small vehicles and removal of energy surcharge caps, dealing blows to the government’s revenue plans.
New Taxes Approved Amid Reform Push
Lawmakers greenlit several revenue measures including a tax on pensions exceeding Rs10 million annually and withdrawal of exemptions for international athletes.
The National Assembly committee agreed to reduce proposed sales tax on solar panels from 18% to 10%, though some members pushed for complete elimination given Pakistan’s energy crisis.
Minister Aurangzeb stood firm on ending amnesty schemes, stating “The era of exemptions and shortcuts is over.” He emphasized expanding the tax net through enforcement rather than concessions.
The FBR proposed tough compliance measures including bank account freezes for non-filers, though lawmakers cautioned against excessive penalties. Opposition leader Omar Ayub questioned the effectiveness of punitive approaches, noting past enforcement failures.
As deliberations continue, the budget debate has exposed fundamental tensions between revenue needs and public affordability, with the IMF’s resilience facility terms also coming under scrutiny.
