The Proposal Was Announced As Part Of A Rs18.77 Trillion Budget With A 4% GDP Growth Target And 8.2% Inflation Forecast. A Budget Presented Amid Middle East War Pressures, Opposition Protests In The National Assembly, And Alongside Relief Measures Including Super Tax Abolition For Exporters And An IT Sector Tax Exemption Extended To June 2029
According to The Express Tribune, Dawn and Geo TV, Pakistan’s Finance Minister Muhammad Aurangzeb presented the federal budget for fiscal year 2026-27 in the National Assembly on Friday June 12, proposing a 90 per cent reduction in withholding tax on international credit and debit card transactions — cutting the rate from 5% to 0.5%.
“Currently, a 5% withholding tax is levied on every transaction made abroad using credit or debit cards issued by banks in Pakistan,” Aurangzeb said during the budget speech. He noted that the existing tax had encouraged the use of informal channels for transferring funds. To discourage such practices, the government has proposed reducing the withholding tax rate to 0.5%, bringing it in line with the level of a routine financial transaction.
“This measure is expected to support the government’s efforts to promote the documentation of the economy and strengthen formal financial channels,” Aurangzeb said.
The proposal provides significant relief to online consumers, freelancers, students, and businesses that use Pakistani bank cards for international transactions. The broader Rs18.77 trillion budget targets GDP growth of 4% and average inflation of 8.2% for FY2026-27, with a fiscal deficit goal of 3.6% of GDP.
Additional highlights included the complete abolition of super tax on exporters, income tax exemption for the IT sector extended until June 2029, tax on export proceeds reduced from 2% to 1.25%, a 7% salary and pension hike, and a flagship National AI Ecosystem Development Programme announced as a $1 billion initiative.
To check out our previous coverage on Pakistan’s economy, taxation, and fiscal policy, read our articles here.
