Budget 2025-26: Era of amnesty schemes is over, says Aurangzeb
• Senate, National Assembly panels oppose carbon levy, term it undue burden on public
• Approve new taxes on high-value pensions, athletes
• Govt asked to reveal terms of IMF’s resilience facility
ISLAMABAD: The parliamentary committees on Thursday rejected the government’s proposal to impose a carbon levy on petroleum products, terming it an undue burden on the public, whereas the finance minister stressed that “the era of tax exemptions and amnesty schemes is over”.
However, they approved new taxes on high-value pensions and the income of international athletes.
The carbon levy became a focal point as the Senate and National Assembly Standing Committees on Finance and Revenue held simultaneous sessions at Parliament House for a clause-by-clause review of the Finance Bill 2025-26.
Chaired by Senator Saleem Mandviwalla and MNA Naveed Qamar, respectively, both panels proposed several amendments and struck down a number of measures. The Senate concluded its deliberations on the proposed tax provisions on Thursday.
The debate revolved around whether the measure should be classified as a levy or a tax, its revenue potential and provincial share, and whether its purpose is genuinely another tool for the federal government to raise additional funds.
Senator Sherry Rehman firmly distinguished between fiscal instruments, stating there is a significant difference between a carbon levy and a carbon tax. Carbon levies are not standard practice, she said, adding that it is carbon taxes that are typically imposed.
She argued that such a measure cannot be introduced through the Finance Bill, calling instead for dedicated legislation.
Senator Shibli Faraz criticised the move as contradictory. “On the one hand, the government highlights climate change; on the other, it introduces a levy. This is not a carbon levy — it is more like extortion,” he said.
Senator Mohsin Aziz cited the Supreme Court ruling in the Zafar Iqbal Jhagra case, stating that “under that decision, a carbon levy cannot be imposed. Doing so may constitute contempt of court.” He also raised concerns over unchecked fuel smuggling from Iran.
Sherry Rehman stressed that carbon taxes are usually applied to specific industries with targeted environmental goals, not levied directly on the general population. “You are burdening ordinary men and women while labelling it climate finance,” she said.
“Our party’s position is clear. Such a levy cannot be implemented through the Finance Bill,” Ms Rehman clarified. Senator Faisal Vawda also opposed the carbon levy, terming it an undue burden on the general public.
MNA Syed Naveed Qamar also sought clarity on the projected revenue from the proposed carbon levy. In response, finance ministry officials said the measure is expected to generate Rs45 billion in fiscal year 2025-26.
Mr Qamar further questioned how much of that amount would accrue to the federal government if the levy is redefined as a tax. State Minister for Finance Bilal Azhar Kayani clarified, “If it is converted into a carbon tax, the federal government would receive Rs18bn”.
To this, Finance Minister Muhammad Aurangzeb asked, “Where did this carbon tax proposal come from?” Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial responded, “The matter surfaced earlier in the Senate Standing Committee on Finance.”
MNA Dr Mirza Ikhtiar Baig offered a key clarification: “If it remains a levy, the entire amount will go to the federal government. But if it becomes a tax, then the provinces will also be entitled to a share.”
Senator Mandviwalla asked for details on the specific use of those funds, while Senator Sherry Rehman demanded that “the government disclose the full terms of the IMF’s Resilience and Sustainability Facility (RSF) agreement”.
Surcharge cap removal
Meanwhile, the Senate parliamentary committee rejected the surcharge cap removal on the plea that it would escalate costs for energy consumers. The committee also rejected the proposed tiered levies on small vehicles.
However, the committee approved proposals to tax annual pensions exceeding Rs10 million, withdraw income tax exemptions for international athletes and extend tax holidays for economic and special technology zones.
The National Assembly’s committee also deliberated on the government’s proposal to impose a 10 per cent sales tax on solar products. Mr Qamar said that the government has agreed to lower the sales tax rate from the proposed 18pc to 10pc on solar panels.
The FBR chairman said that parliament must take the final decision; once it does, the tax authority will implement the required amendment.
MNA Mubeen Arif remarked that if the Senate has recommended a 10pc rate, the National Assembly committee should push for a further reduction. Mr Qamar clarified that the recommendation did not come from the Senate but originated within the NA committee itself.
Provisions relating to fraud were deferred for further deliberation, and the Finance Bill was held over for reconsideration at the next meeting.
The committee recommended reviewing the Export Finance Scheme for raw cotton and suggested aligning taxes on local cotton production with those on imported cotton.
New energy vehicle adoption
Members also discussed the New Energy Vehicle Adoption Levy Act, 2025, and noted the lack of a comprehensive plan for transitioning to electric vehicles, citing the scarcity of charging stations.
It was further noted that hybrid vehicles have not been included in the proposed measures. Given these concerns, the committee decided to defer consideration of the matter until the next meeting, with directions to the ministry to present a comprehensive and actionable plan for the implementation of the objectives outlined in the proposed Finance Bill.
The committee also considered the proposed amendments to the Stamp Act. During detailed deliberations, it was observed that the term non-filer is being used in the proposed amendment, even though this category has been removed from the applicable laws. In light of this inconsistency, the committee decided to defer consideration of the amendment until the next meeting.
Tax amnesty scheme
Finance Minister Aurangzeb said that there will be no more tax exemptions or tax amnesty schemes. He said the era of tax exemptions and amnesty schemes is over. “We are now focused on expanding the tax net, and that process is actively underway,” he added.
The committee’s debate underscored deep concerns over tax compliance, as the FBR proposed stringent enforcement measures — barring unregistered individuals from operating bank accounts and disconnecting utilities for non-compliant Tier-1 retailers — while acknowledging systemic gaps, with only 35,000 of 300,000 industrial units registered for sales tax.
Lawmakers weighed punitive amendments to Section 14AC against the practical risk of overreach. While MNA Javed Hanif endorsed the tougher stance, others like Sharmila Faruqi urged a shift towards incentives rather than penalties.
Opposition leader Omar Ayub questioned how many connections had actually been cut for non-filers, warning that excessive powers for tax officers could be counterproductive.
The FBR chief acknowledged evasion tactics and stressed the need for enhanced powers, while assuring that deterrents such as bank account freezes would be temporary.
Published in Dawn, June 20th, 2025