The federal government, in the Budget 2026-27, has announced a major relief measure for consumers by reducing the tax on international debit and credit card transactions from 5 percent to just 0.5 percent, according to budget documents and official speech details.
The decision is part of a broader package of tax reforms aimed at encouraging digital financial activity, reducing cash-based transactions, and facilitating overseas Pakistanis as well as local users making international payments.
Relief for digital, foreign transactions
Under the new measures, the withholding tax on international transactions made through debit and credit cards has been significantly reduced, marking one of the largest cuts in recent years for cross-border digital payments.
Officials said the move is intended to make international shopping, subscriptions, travel bookings, and online services more affordable for consumers in Pakistan.
According to the budget speech, the reduction in tax rates is also aimed at bringing more financial activity into the documented economy.
By lowering transaction costs, the government expects an increase in the use of banking channels for foreign payments, which may help improve transparency and reduce informal cash-based systems.
The announcement comes alongside several other tax relief measures in the budget, including reductions in property-related taxes and incentives for multiple sectors.
Officials stated that these reforms are designed to stimulate economic activity, support the construction industry, and encourage investment in both domestic and foreign markets.
Expected impact
Economists suggest that the cut in international card transaction taxes could boost:
- Online international shopping
- Travel and tourism-related payments
- Subscription-based digital services
- Use of formal banking channels
However, they also note that the impact will depend on how effectively the policy is implemented and whether banks pass on the full benefit to consumers.
Budget 2026-27
The total outlay of Pakistan's federal budget 2026-27 is estimated at around Rs18.771 billion, with a focus on fiscal consolidation, IMF compliance, and modest relief measures.
Key figures include an ambitious FBR tax target of around Rs15.264 trillion, non-tax revenue of Rs2.77 trillion, and Petroleum Development Levy of Rs1.73 trillion.
Major expenditures are dominated by debt servicing (Rs8.54 trillion), defence (Rs3 trillion), and a constrained federal PSDP of Rs1 trillion (national development outlay Rs 3.2–3.7 trillion).
According to the Ministry of Finance, Rs1,169 billion has been allocated for pensions and Rs1,71 billion for civil government affairs.
The budget follows an Economic Survey showing around 3.7% GDP growth in the outgoing year and includes expected 10% salary/pension increases alongside tax base broadening efforts.
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