Taxing the untaxed: Real test of budget 2026-27

AS Pakistan moves closer to the announcement of the Federal Budget 2026-27, speculation has intensified regarding the government’s taxation strategy. The central question is whether the burden of taxation will finally shift toward influential and affluent segments of society or whether ordinary citizens, particularly the poor and middle classes, will continue to shoulder the cost of fiscal adjustment. While the final shape of the budget remains subject to ongoing negotiations between policymakers and international financial institutions, several trends have already become visible. Expectations of a truly people-friendly budget appear unrealistic under the prevailing economic circumstances. Pakistan’s economic indicators present a troubling picture. According to recent estimates, per capita income stands at around $1,700. However, this figure conceals a vast disparity between the rich and the poor. A small segment of society enjoys enormous wealth, while millions struggle to meet their basic needs. Inflation has eroded purchasing power, salaries have failed to keep pace with rising prices and poverty continues to expand. The country’s external position remains fragile. Foreign exchange reserves remain below $17 billion, a significant portion of which consists of deposits from friendly countries such as Saudi Arabia and China. Meanwhile, Pakistan’s external debt has crossed $137 billion. Unlike larger economies that possess stronger industrial bases, diversified exports and substantial reserves, Pakistan remains vulnerable to external shocks and debt-servicing pressures. Equally alarming is Pakistan’s weak performance on social indicators. The country ranks well below regional neighbours such as India, Bangladesh, Nepal, Sri Lanka and the Maldives on the Human Development Index. Education, healthcare and social protection remain underfunded, leaving millions without access to quality public services. Given these realities, substantial fiscal relief for the common citi