Budget 2026-27 proposes 90pc cut in tax on foreign card spending to push digital formalisation

The federal government on Friday moved to sharply reduce the cost of overseas spending through bank-issued cards, proposing a 90 per cent cut in withholding tax on international credit and debit card transactions in Budget 2026-27.

Finance Minister Muhammad Aurangzeb, while presenting the federal budget for the upcoming fiscal year, announced that the withholding tax rate on foreign transactions made via Pakistani credit and debit cards would be reduced from 5 per cent to 0.5 per cent.

He said the existing 5 per cent levy on each international transaction had encouraged individuals to rely on informal channels for moving money abroad.

According to the minister, the revised rate is intended to bring such transactions closer to standard financial activity levels while discouraging the use of non-formal transfer mechanisms.

Aurangzeb stated that the reduction would support government efforts to strengthen the documentation of the economy and expand the use of formal banking channels.

If implemented, the measure would significantly reduce the tax burden on consumers conducting online or overseas payments using Pakistani bank cards, marking a notable shift in the treatment of international digital transactions under the proposed budget framework.