The federal government is preparing a detailed fiscal strategy for the 2026–27 budget that balances an ambitious expansion of the domestic tax base with targeted documentation requirements and strategic import liberalisation. This approach aims to enhance revenue collection while supporting key economic sectors.
The forthcoming budget will focus heavily on broadening the tax net to increase overall revenue. Several proposals under consideration could substantially impact domestic business operations, trade dynamics, and consumer prices nationwide.
While the final budget framework is still being finalized, officials are weighing a combination of relief measures for critical industries alongside measures designed to boost government revenues.
In a significant development, the government is considering eliminating the 1 percent advance tax on exporters. This move is intended to alleviate liquidity challenges in the export sector and encourage foreign exchange inflows during a crucial period for the national economy. Additionally, broader tax relief options are being explored to enhance the global competitiveness of local industries.
On the import front, substantial tariff rationalisation is planned. The statutory import duty on cosmetic products could be reduced from 44 percent to 40 percent. Moreover, tax relief may be extended to machinery imported by beauty parlours, clinics, and health and fitness centres. If implemented, these changes are expected to lower retail prices for essential personal care items such as sunscreens, sunblocks, shaving creams, aftershaves, and various body lotions.
To combat tax evasion and improve sales tax enforcement at the retail level, authorities plan to strengthen documentation requirements for high-volume consumer goods. It may become mandatory to display retail prices directly on the packaging of essential products including baby formula milk, ketchup, ghee, cooking oil, and tea. This initiative aims to eliminate grey market practices and bring retail supply chains under stricter regulatory control.
However, some fiscal consolidation measures could increase inflationary pressures on consumers. The government is actively discussing a proposal to double the climate levy on petroleum products from Rs2.5 to Rs5 per litre. Furthermore, structural reforms under review include the possible removal of long-standing tax exemptions for the merged districts of Khyber Pakhtunkhwa, as part of efforts to rationalise subsidies and strengthen the overall fiscal consolidation strategy.
