Business community gives mixed verdict on FY27 budget, seeks stronger focus on exports and industry

Business and industry leaders have given a mixed response to the federal budget for FY2026-27, welcoming several tax relief measures while expressing concern over the absence of a comprehensive strategy for exports, industrial growth and investment.

Most stakeholders acknowledged that the budget was prepared under International Monetary Fund (IMF) conditions and fiscal constraints, but argued that the next phase of economic policy should focus on growth rather than stabilisation alone.

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 3.7%, a fiscal deficit of 0.7% of GDP and a 23% decline in public debt-servicing costs.

He welcomed measures including the abolition of super tax on income between Rs150 million and Rs500 million, the reduction of the rate from 10% to 8% for higher-income earners, lower taxes for salaried individuals, relief for the construction sector, the abolition of Capital Value Tax on foreign assets and the removal of Federal Excise Duty on international business-class travel.

However, Sheikh questioned the feasibility of the FBR’s Rs15.2 trillion tax target and the Rs1.7 trillion petroleum levy target, warning that both could fuel inflationary pressures.

Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M. Abdul Aleem described the budget as a serious attempt to manage difficult economic conditions but said the burden of taxation continued to fall on compliant businesses and salaried taxpayers.

He noted that cash circulating in the economy had increased from Rs9 trillion to Rs12 trillion over the past year, indicating that a large portion of economic activity remains outside the formal tax system.

OICCI welcomed the partial rationalisation of the super tax, lower export-related taxes and reduced advance taxes in the real estate sector. It also supported the proposed National Faceless Assessment Centre, which is expected to reduce direct interaction between taxpayers and tax officials.

However, the chamber criticised the government's failure to address sales tax issues affecting oil refineries and marketing companies, saying it could delay planned investments worth $6 billion to $10 billion. It also called for reforms to minimum tax provisions and faster settlement of tax refunds.

Arif Habib Limited Chief Executive Officer Shahid Ali Habib described the budget as the strongest of Finance Minister Muhammad Aurangzeb’s three budgets, saying that reductions in salary taxes, lower super tax rates and relief for exporters and the construction sector would support economic activity. 

According to Habib, salaried taxpayers could see tax reductions ranging from 13% to 17%, while property-related taxes have been cut substantially. He said the main challenge would now be achieving the Rs15.2 trillion tax collection target through expansion of the tax base and stronger enforcement.

Businessmen Group Chairman Zubair Motiwala termed the budget “neither good nor bad”, saying it lacked major incentives capable of significantly increasing exports or industrial competitiveness.

He criticised the government's decision not to restore the Final Tax Regime (FTR) for exporters. Instead, the withholding tax rate was reduced from 2% to 1.25% and converted into a minimum tax, leaving exporters within the normal tax framework.

Motiwala also highlighted the absence of measures to reduce electricity and gas costs for industry and questioned how the government expected to achieve ambitious revenue targets without creating a more business-friendly environment.

Despite these concerns, he welcomed lower taxes for salaried individuals, relief for the construction and real estate sectors, continued concessions for electric vehicle kits and steps aimed at improving tax administration.

SITE Association of Industry President Abdul Rahman Fudda said manufacturers had expected more substantial reforms. He welcomed the intent behind tariff reforms and super tax reductions but argued that the pace of reform remained too slow for industries operating below capacity.

Fudda identified high electricity tariffs, sales tax-related working capital pressures and stricter penalty regimes as key unresolved issues affecting manufacturers.

“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.

Patron-in-Chief of the All Pakistan Fruit and Vegetable Exporters Association (PFVA) Waheed Ahmed said agriculture and horticulture received limited attention despite facing significant challenges.

He welcomed the Rs88 billion allocation under the Export Refinance Scheme, lower export taxes and the abolition of super tax on income between Rs150 million and Rs500 million.

However, he criticised the decision not to fully eliminate export-related taxes and expressed disappointment over the absence of incentives for alternative energy, which he said could help reduce production costs and improve competitiveness.

Meanwhile, the Lahore Chamber of Commerce and Industry (LCCI) described the budget as a balanced attempt at economic stabilisation and documentation but said it lacked a clear roadmap for industrial expansion, small and medium-sized enterprises, agriculture and the information technology sector.

LCCI office-bearers also questioned whether the Rs109 billion allocation for dams and water reservoirs would be sufficient to address Pakistan’s growing water security challenges and stressed that future revenue growth should come primarily through broadening the tax base rather than increasing pressure on existing taxpayers.

While welcoming reforms in property taxation, tax relief for salaried individuals and measures to improve documentation, the chamber urged the government to place greater emphasis on investment, skills development and job creation in future policy decisions.