Massive Tax Shortfall Undermines Pakistan’s Fiscal Targets

The Federal Board of Revenue (FBR) has reported a widening tax shortfall of Rs833 billion during the first 10 months of the current fiscal year, despite the imposition of record additional taxes and curbed refunds.

According to provisional data released Thursday, the FBR collected Rs9.3 trillion from July to April—27% higher than the same period last year—but still failed to meet revenue commitments.

In April alone, the FBR missed its monthly target by Rs139 billion, collecting Rs844 billion against a goal of Rs983 billion. This pushed the cumulative shortfall well beyond the Rs640 billion ceiling agreed with the International Monetary Fund (IMF).

The IMF has already revised down the annual tax target from Rs12.97 trillion, acknowledging that the original figure was no longer attainable.

Despite introducing an additional Rs1.3 trillion in taxes in the previous budget—including levies on essential items like milk—the FBR struggled to close the gap. Refund disbursements totaled Rs428 billion for the 10-month period, only slightly higher than last year.

Income tax was the only major revenue stream to surpass its target, with collections hitting Rs4.48 trillion—Rs325 billion above target and Rs973 billion more than the previous year. This growth was largely driven by contributions from the salaried and corporate sectors. The salaried class alone paid Rs391 billion in taxes by March, up 56% year-on-year, and nearly 14 times more than what was collected from traders.

Sales tax revenue reached Rs3.17 trillion—Rs775 billion below target—due to slower-than-expected growth in large-scale manufacturing. However, it still showed an annual increase of Rs677 billion.

Federal excise duty collection stood at Rs602 billion, falling Rs157 billion short, while customs duties totaled Rs1.05 trillion—Rs228 billion below the goal. Both categories recorded year-on-year increases, but performance was hindered by declining imports and alleged manipulation of import declarations, often involving corrupt officials.