ISLAMABAD: The International Monetary Fund (IMF) is likely to propose additional contingency revenue measures if Pakistan’s Federal Board of Revenue (FBR) fails to recover from its tax collection shortfall in the second quarter of the current fiscal year 2025-26.
Official sources confirmed that the issue was discussed extensively during the ongoing policy-level talks between Pakistani officials and the IMF review mission. The FBR reported a shortfall of Rs198 billion in the first quarter (July–September), collecting Rs2,885 billion against the target of Rs3,083 billion.
In September alone, the FBR fell short by Rs138 billion, collecting Rs1,230 billion against the monthly target of Rs1,368 billion. The projected shortfall for the entire fiscal year could exceed Rs400 billion, potentially forcing the government to revise its ambitious tax collection target of Rs14.13 trillion.
Although discussions are underway to revise the FBR’s annual target, no final decision has been reached. Finance Minister Muhammad Aurangzeb has so far ruled out any possibility of a mini-budget, asserting that no new tax measures are currently being considered. “Till now, no working on new taxation measures has been started in the FBR,” a senior official confirmed.
Meanwhile, the FBR has highlighted ongoing reforms to address structural weaknesses. These include expanding its workforce with the hiring of 1,600 new auditors to enhance audit capabilities. Additionally, digital production monitoring has been rolled out in key sectors including sugar, cement, beverages, and textiles.
The FBR's broader transformation strategy involves integrating data sources and digitizing processes to improve tax compliance. The department is also working to use artificial intelligence to select taxpayers for audits based on risk parameters. These measures are aimed at reducing evasion, improving transparency, and bolstering enforcement.
These efforts have begun to yield results. The FBR's tax-to-GDP ratio improved from 8.8% in 2023-24 to 10.24% in 2024-25. Initiatives like the Faceless Customs Appraisement have also contributed, increasing revenue per goods declaration by 17.3%.
Enforcement measures have shown significant progress, with revenue from enforcement actions increasing eightfold in 2024-25 compared to the previous year.
However, the IMF remains cautious. In its latest report under the Stand-By Arrangement (SBA), it reiterated the availability of eight pre-agreed contingency measures — collectively expected to generate Rs216 billion in revenue annually. These include raising sales tax on textiles and leather to 18%, imposing excise duties on sugar, and increasing various advance and withholding taxes.
Should revenue performance continue to lag, these measures may be activated to keep Pakistan's fiscal targets on track.
