Pakistan’s tax shortfall reached Rs725 billion in the first nine months (July-March) of fiscal year 2024-2025, despite slower refunds and efforts to boost collections. The shortfall deepened in March alone by more than Rs100 billion, jeopardizing the government’s commitment to limit the gap to Rs640 billion, according to a news report.
The Federal Board of Revenue (FBR) reported provisional tax collections of Rs8.44 trillion by the end of March, up 28% from the previous fiscal year, but still falling short of the Rs9.17 trillion target for the period. Despite the increase, the revenue missed the target by Rs725 billion, leaving the government struggling to meet fiscal targets ahead of the IMF’s review.
As a result of Pakistan’s continued revenue shortfall, the IMF agreed to revise the annual target from Rs12.97 trillion to Rs12.33 trillion, a reduction of Rs640 billion. The revision was due to slower-than-expected economic growth and inflation, while the overall tax-to-GDP ratio target of 10.6% remains unchanged.
For March, the FBR had a target of Rs1.219 trillion but could only collect around Rs1.1 trillion by the end of the month, even with efforts to accelerate tax collection and drastically reduce refunds.
The IMF has pressured Pakistan to introduce additional taxes, including levies on nearly all consumable goods, such as medical tests, milk, vegetables, and children’s products. However, despite the new taxes, FBR has struggled to meet its targets in key areas like sales tax, federal excise duties (FED), and customs duties.
Sales tax collection reached Rs2.86 trillion, falling short by Rs656 billion from the target of Rs3.5 trillion. The FED collection amounted to Rs537 billion, missing the target by Rs143 billion, and customs duties totaled Rs926 billion, missing its target by Rs208 billion.
Refunds in March amounted to Rs34 billion, a 52% reduction from the same period last year, indicating the government’s push to slow down refunds to manage the shortfall. Overall, the FBR paid Rs384 billion in refunds during the first nine months, a mere Rs6 billion increase over the previous year.
