Pakistan’s government has missed the IMF’s first-quarter target to collect Rs10 billion from traders under the Tajir Dost scheme, raising concerns about the country’s $7 billion loan agreement.
As per media reports, the Federal Board of Revenue (FBR) managed to collect a mere Rs1.3 million, just 0.001% of the target, highlighting a massive shortfall. While the IMF had set the floor on net tax revenues from retailers for the first quarter at Rs10 billion, but the collection was negligible.
This is one of the largest misses in IMF programme history, signaling a serious failure in Pakistan’s tax collection strategy. The IMF had pushed for the scheme to bring traders, exporters, and farmers into the tax net, but implementation has been weak.
By mid-October, only 575 traders had paid their taxes under the Tajir Dost scheme, with a total collection of less than Rs1.3 million. The government had planned to collect Rs23.4 billion by the end of the second quarter, with a full-year target of Rs50 billion, but that now seems unlikely.
Tax laws allow the FBR to seize shops and arrest non-compliant traders, but the authority has yet to take such action. Traders have threatened indefinite strikes if stricter enforcement measures are adopted.
The dismal performance in trader taxation comes on the heels of another major shortfall—the FBR missed the overall first-quarter tax collection target by Rs90 billion. The IMF has warned that Pakistan will need to introduce a mini-budget if its quarterly tax targets are missed by more than 1%. With the FBR already far off course, a mini-budget now seems inevitable.
The Tajir Dost scheme was designed to target the trader class in 42 cities, which has long been perceived as politically close to the ruling PML-N government. Meanwhile, salaried individuals continue to bear the brunt of tax collection efforts.
Despite increasing withholding taxes for non-filers from 1% to 2.5% to bring more traders into the tax net, the government has struggled to enforce compliance. While withholding tax collection increased by 53% in the first quarter, much of this was based on payments from the previous fiscal year.
