The federal government has disputed assertions that Pakistan’s provinces are outperforming the centre in tax collection, presenting official figures that indicate provincial tax revenues remain significantly lower than federal collections despite large constitutionally assigned tax bases, the adviser to the finance minister said.
Khurram Schehzad, Advisor to the Finance Minister, took to X (formerly Twitter) to address the issue, stating: “There’s a claim circulating that provincial tax performance has been better than the federal, and that this should settle the debate on whether resource allocation needs revisiting. The factual details point to a different conclusion.”
Using data from the Federal Board of Revenue (FBR) for fiscal year 2024-25, Schehzad noted that the federal government’s tax collections exceeded Rs13 trillion, equivalent to 11.3% of GDP, and are projected to reach 15% of GDP by June 2028. In contrast, combined provincial tax receipts totalled just Rs979 billion, approximately 0.85% of GDP, far below the roughly 3% share expected from provinces in comparable federations.
“Federal collections are already at 11.3% of GDP and moving toward benchmark levels. Provincial collections, combined, remain at 0.85% of GDP, far below the 3% expectation, despite substantial tax bases in services, agriculture, and property sectors,” Schehzad said, reiterating the scale of the gap between potential and actual revenues.
Schehzad highlighted specific provincial tax categories, noting significant disparities in yield. He pointed out that the services sector, which is a provincial subject with an estimated taxable base of Rs29 trillion, generated only Rs650 billion in revenue, a 2.2% yield. By comparison, the federally administered goods sector, with a similar taxable base, generated about Rs3.9 trillion, or a 13% yield. Agricultural income tax, another provincial domain, produced only Rs8.4 billion against a Rs3.7 trillion taxable base, reflecting a 0.2% yield. Property-related levies such as stamp duties generated about Rs66 billion, roughly 0.3% of an estimated Rs21.7 trillion asset base.
“Progress demands a balanced reform agenda with stronger revenue efforts at every level,” the adviser said, adding that federal and provincial governments must work together to close tax gaps and support service delivery, reduce fiscal stress and strengthen the federation.
The debate comes amid broader discussions on fiscal federalism in Pakistan, including how revenues are shared and how provinces can increase their own revenue mobilization to support devolved functions under constitutional arrangements.
