ISLAMABAD: The Federal Board of Revenue (FBR) has collected Rs11.735 trillion in tax revenues during the fiscal year 2024-25 (July–June), falling short of the originally approved parliamentary target of Rs12.97 trillion, according to provisional data released Saturday night. This marks a shortfall of Rs1.235 trillion, or nearly 10% below the initial estimate.
The collection target was revised downward twice — first to Rs12.332 trillion in February/March 2025, and later to Rs11.9 trillion in the 2025-26 federal budget. Yet, even this revised figure proved overly optimistic, with the FBR falling Rs165 billion short of the final target.
The government now faces an uphill battle to meet its newly set Rs14.131 trillion tax collection target for the 2025-26 fiscal year, a steep 20% increase from this year’s actual performance.
Fiscal Constraints Loom
With the missed tax target and constrained revenues, the government has limited fiscal space and must curb expenditures to keep the fiscal and primary deficits within IMF limits for the end of June 2025. Some relief was found in reduced interest payments, which came in at Rs8.9 trillion—Rs0.8 trillion less than the Rs9.7 trillion budgeted—thanks to slightly lower inflation and interest rates.
In a statement, the FBR noted:
“The annual tax collection target was ambitiously set at PKR 12.3 trillion, marking a substantial 32% increase compared to PKR 9.3 trillion collected during FY 2023-24.”
Officials stressed that while growth expectations were pegged at 15%, economic stagnation and weaker-than-expected inflation led to shortfalls in indirect tax collections, particularly in sales tax.
Breakdown of Tax Revenues
The provisional Rs11.735 trillion collection represents a 26% increase year-on-year, thanks to enhanced enforcement and new policy interventions.
Here’s the revenue breakdown by category:
-
Income Tax: Rs5.784 trillion
– 28% increase from previous year -
Sales Tax: Rs3.9 trillion
– 26% increase -
Federal Excise Duty: Rs1.284 trillion
– 27% increase -
Customs Duty: Rs0.767 trillion
– 16% increase
Challenges Ahead
The FBR highlighted the importance of balancing tax policy with macroeconomic stability. While raising taxes might have generated more revenue, it would also have worsened inflation and disproportionately impacted lower-income households.
“Maintaining inflation at relatively low levels provided critical relief to vulnerable segments of the population, particularly those near or below the poverty line,” the FBR stated.
Yet, experts warn that without deep structural reforms in the tax administration, compliance culture, and the documentation of the economy, next year’s Rs14.131 trillion target will remain elusive.
A senior tax official, speaking on condition of anonymity, said:
“The tax-to-GDP ratio remains alarmingly low. Without expanding the tax net and enforcing compliance among high-consumption, low-tax segments, we’re running out of tools.”
