Major Errors Found in Government’s Proposed Finance Bill 2025-26

ISLAMABAD – Just days after Finance Minister Muhammad Aurangzeb tabled the federal budget for fiscal year 2025-26, significant errors have emerged in the Finance Bill 2025-26, sparking criticism and calls for immediate rectification. According to a report by The News, the bill references outdated aviation policies and presents inconsistencies in tax provisions related to the aviation sector and pensioners.

One of the most glaring oversights is the bill’s reference to the Aviation Policy of 2015, despite the fact that the Aviation Policy of 2023 is currently in effect. Experts note that this is not a minor clerical issue, as aviation regulations directly impact licensing, tariffs, and import rules. The bill also fails to align with the Civil Aviation Act 2023, which does not use the term “registration of airlines” but instead mandates licensing and operational certification.

Additionally, the Federal Board of Revenue (FBR) has proposed tax exemptions on the import or lease of aircraft exclusively for Pakistan International Airlines Corporation Limited (PIACL). This has raised concerns about policy inconsistency and fairness, especially in light of the government’s ongoing efforts to privatize PIA. Questions are being raised as to whether these exemptions will continue post-privatization, and why similar relief has not been extended to other commercial airlines operating in the country under the principle of equity.

Further issues include ambiguity over General Sales Tax (GST) on leased aircraft. While GST is reportedly charged on lease amounts, the bill fails to clarify how such taxation will be administered or resolved.

This comes shortly after a controversial error regarding pension taxation was discovered in the proposed bill. The FBR acknowledged that the provision was unintentional and promised it would be removed. If passed without correction, the clause could have drawn thousands of pensioners into the tax net, contradicting government assurances of protection for retirees.

Read more: Aurangzeb Highlights Economic Reforms as Key to Reducing IMF Reliance

The federal government, under Prime Minister Shehbaz Sharif, has proposed a Rs17.57 trillion budget for FY26, featuring a 10% salary increase for government employees, a 7% rise in pensions, and a GDP growth target of 4.2%. The FBR has also been tasked with achieving an ambitious tax collection goal of Rs14,131 billion, an 18.7% increase from the current year, alongside non-tax revenue projections of Rs5,147 billion.

Of the Rs17.573 trillion in total federal expenditure, Rs8.207 trillion has been allocated for debt servicing, underscoring the fiscal challenges facing the government. However, the technical flaws and policy misalignments in the Finance Bill have overshadowed budgetary announcements and raised concerns about the bill’s legal and operational robustness.

In response to the growing criticism, the FBR has formed anomaly committees to identify and correct discrepancies before the bill is passed into law. Stakeholders are urging the government to act swiftly to avoid confusion and ensure that the final Act of Parliament is both accurate and equitable.