Finance Minister Aurangzeb Announces Rate Cut From 5% to 0.5% to Boost Economic Documentation
The government has proposed a 90% reduction in withholding tax on international credit and debit card transactions in Budget 2026-27. Finance Minister Muhammad Aurangzeb announced the cut while presenting the federal budget on Friday. The rate will drop from 5% to 0.5%.
Existing Tax Pushed Users Towards Informal Channels
The current 5% withholding tax applies to every overseas transaction made through bank-issued cards in Pakistan. Aurangzeb said this high rate had pushed people towards informal channels for transferring funds abroad. The government wants to reverse this trend.
New Rate Brings Cards in Line With Routine Transactions
The proposed 0.5% rate aligns international card transactions with standard financial transaction levels. The minister said the cut will discourage the use of informal transfer methods and bring more transactions into the formal economy.
Move to Strengthen Formal Financial System
Aurangzeb said the measure directly supports the government’s broader goal of documenting the economy. It will strengthen formal financial channels and encourage more Pakistanis to use bank-issued cards for overseas spending.
Significant Relief for Online Consumers
If parliament approves the proposal, online consumers and international travellers will receive significant relief. The 90% tax reduction lowers the cost of every foreign card transaction and makes formal banking a more attractive option for everyday users.