Finance Bill 2026 accused of favouring top earners while lower-income salaried workers receive no meaningful relief
ISLAMABAD: The federal government is facing growing criticism after proposing tax measures in the Finance Bill 2026 that are expected to cost the national exchequer more than Rs50 billion, largely benefiting highly paid corporate executives and top-income salaried individuals.
While the government has presented the measures as tax relief for the salaried class, analysts and tax experts argue that the overwhelming share of the benefits will accrue to individuals earning millions of rupees annually, leaving lower and middle-income employees with little or no relief despite persistent inflation and rising living costs.
Under the proposed amendments, the government has revised income tax slabs for salaried individuals and reduced the tax burden on higher-income groups. Although the maximum tax rate of 35 percent remains unchanged for annual taxable income exceeding Rs7 million, the structure of upper tax brackets has been altered to lower the effective tax liability for top earners.
A key change involves splitting the existing tax slab applicable to salaried individuals earning above Rs4.1 million into multiple brackets, thereby reducing the progressive tax burden on those falling within higher income categories. The government has also proposed abolishing the 9 percent surcharge imposed under Section 4AB of the Income Tax Ordinance on salaried individuals earning more than Rs10 million annually, effective from tax year 2027.
According to estimates, these two measures alone are expected to result in a revenue loss exceeding Rs50 billion, providing substantial tax savings to a relatively small segment of affluent taxpayers.
Critics argue that the proposed relief package reflects a significant imbalance in fiscal policy at a time when ordinary wage earners continue to struggle with elevated inflation, increasing utility costs and declining purchasing power.
The government has come under particular scrutiny for declining to raise the income tax exemption threshold despite repeated recommendations from business groups, tax practitioners and economic experts. Several proposals submitted to the Ministry of Finance had called for increasing the annual tax-free income threshold from Rs600,000 to Rs1.2 million in order to provide relief to lower-income employees affected by inflation.
However, the Finance Bill 2026 retains the existing threshold, meaning individuals earning slightly above Rs600,000 annually will continue to remain within the tax net despite mounting financial pressures.
Observers note that while the government has extended significant concessions to high-income salaried individuals, workers in lower income brackets have received no comparable support. The contrast has fuelled concerns that the tax policy disproportionately favours corporate executives and senior management personnel while offering limited assistance to the broader salaried population.
Economists warn that such measures could further deepen perceptions of inequality, particularly as the government continues to pursue fiscal consolidation and revenue mobilisation efforts under broader economic reform programmes.
With inflation still weighing heavily on household budgets, the proposed tax relief package is expected to remain a contentious issue as lawmakers continue their review of the Finance Bill 2026 before its final approval.
