The Federal Board of Revenue (FBR) is facing a critical shortfall of Rs1 trillion to meet its tax collection target of Rs6.009 trillion for the July-December period, a key condition under Pakistan’s agreement with the International Monetary Fund (IMF).
Finance Minister Muhammad Aurangzeb expressed hope during a press conference on Thursday that the IMF program would continue but avoided confirming whether a mini-budget or revised tax targets were on the horizon.
As of Thursday, the FBR has collected only Rs5 trillion, barely 50% of its Rs1.37 trillion monthly target. With just five days remaining in December, the tax authority is under immense pressure to meet its commitments to the IMF, under which it has also recently implemented policies targeting marriage halls and other sectors to broaden the tax base.
Aurangzeb noted that while efforts to broaden the tax base were ongoing, certain economic and policy assumptions had failed to materialize, further widening the gap.
FBR Chairman Rashid Langrial shared that out of 169,390 notices sent to top-income earners, only 38,002 responded, collectively contributing Rs377.6 million in taxes—averaging just Rs9,920 per filer. Langrial revealed that the government’s unpaid tax liability stands at Rs1.6 trillion, mostly from the top 5% income earners.
The annual tax target of Rs13 trillion now seems unattainable, with a 40% growth projection proving overly ambitious. Last fiscal year, tax collection growth was 29%, significantly lower than this year’s requirements.
Aurangzeb hinted at possible compromises with commercial banks regarding the 15% additional advance-to-deposit ratio tax. However, non-filers remain a challenge, as they continue to legally conduct transactions, barring specific cases like property or vehicle purchases.
Langrial acknowledged loopholes in sales tax law, allowing businesses with annual sales below Rs100 million to avoid registration. While legislation has been introduced to tackle non-compliance, the tax potential from 95% of the population remains minimal at Rs140 billion.
The IMF will closely review December’s tax data to decide on Pakistan’s future financial trajectory. A mini-budget remains a possibility, with potential new taxes on imports, contractors, and other sectors under consideration.Â
Despite the challenges, Aurangzeb reiterated the government’s commitment to its IMF commitments, emphasizing efforts to avoid surprises that could disrupt the ongoing program.
With Pakistan already grappling with record-high tax measures and a widening fiscal gap, the coming days will determine whether further revenue-enhancing measures will be introduced to bridge the shortfall.
