The government of Pakistan, through its latest Finance Bill 2025-26 set to receive the President’s approval today, has granted sweeping tax exemptions to more than 50 public entities, charitable organizations, and global financial institutions. Passed with minimal public discussion, these provisions highlight the state’s continued use of tax concessions as a tool for institutional support and diplomatic engagement.
Among the prominent beneficiaries is the State Bank of Pakistan (SBP) and its subsidiary, the SBP Banking Services Corporation, both of which will now enjoy complete income tax exemptions. Similarly, the Federal Board of Revenue’s FBR Foundation, Pakistan Water and Power Development Authority (WAPDA), Pakistan Council of Scientific and Industrial Research (PCSIR), and Pakistan Agricultural Research Council will also operate free of income tax obligations.
The bill extends notable relief to security and military-linked institutions such as the Army Welfare Trust, Fauji Foundation, and the Army Officers Benevolent Fund, along with its associated bereaved family scheme. Additionally, corporatised entities of WAPDA have secured tax-free status until their corporatisation processes are formally concluded.
The Finance Bill also shields several funds set up in response to crises, including the Prime Minister’s COVID-19 Pandemic Relief Fund-2020, the National Disaster Risk Management Fund, and the Chief Minister Punjab’s Relief Fund for internally displaced persons from the erstwhile NWFP. Scholarship and education-focused bodies like the National Endowment Scholarship for Talent (NEST) and the Balochistan Education Endowment Fund (BEEF) have similarly been granted exemptions.
Adding to the list are regulatory and economic institutions such as the Securities and Exchange Commission of Pakistan (SECP), Privatisation Commission, Audit Oversight Board, Public Private Partnership Authority (for a defined period), and even the Supreme Court’s special accounts like the Diamer Bhasha and Mohmand Dams Fund and Water Conservation Account.
International and regional financial organizations have not been left out. The Finance Bill secures tax-exempt status for heavyweights like the International Finance Corporation (IFC), Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), ECO Trade and Development Bank, and various bodies affiliated with the Organisation of Islamic Cooperation (OIC) and Saarc.
Other entities now enjoying tax-free privileges include the Pakistan Mortgage Refinance Company, Export-Import Bank of Pakistan, multiple domestic and international Sukuk companies linked to WAPDA, and even philanthropic setups such as the Pakistan Poverty Alleviation Fund, Karandaaz Pakistan, and several arms of the Aga Khan Development Network.
Perhaps most unusually, the bill also exempts from tax the pensions of a former president and his widow, and sets tax-free awards for Olympic medalists starting from tax year 2025.
While such widespread exemptions might be aimed at fostering institutional stability, economic development, and maintaining international partnerships, they also raise significant concerns over revenue losses at a time when Pakistan is grappling with fiscal stress. Critics argue that without stringent checks and a transparent disclosure mechanism, these carve-outs risk deepening inequities in the tax regime and complicating future negotiations with global lenders.
As the Finance Bill 2025-26 becomes law, it will likely intensify debates around how Pakistan balances its tax base expansion with the need to support strategic, social, and diplomatic priorities through selective relief.