IMF considers additional conditions for Pakistan tax system as FBR misses enforcement targets

The International Monetary Fund (IMF) is considering additional conditions for Pakistan’s tax system, focusing on enforcement outcomes and revenue generation under the ongoing $7 billion programme, The Express Tribune reported. 

Officials said the IMF has proposed two to three new structural benchmarks to monitor the Federal Board of Revenue’s progress on compliance risk management, digital invoicing, and production monitoring. The move comes after concerns that existing enforcement measures have not delivered expected results.

One proposed condition requires the FBR to generate a defined share of revenue from audits selected through the compliance risk management system. The system identifies high-risk taxpayers for audit to improve compliance and increase collections.

Tax authorities have raised reservations about linking audit outcomes to fixed revenue targets, stating that recoveries cannot be guaranteed due to taxpayers’ legal rights to challenge assessments. Data from the last tax cycle shows around 57,000 cases flagged for potential audit, with the IMF asking for at least 10% of high-risk cases to be pursued.

The IMF is also seeking measurable progress in digital invoicing. Authorities are being asked to ensure that a portion of sales transactions are recorded in real time through integrated systems to reduce tax evasion.

Pakistan’s documented sales volume is estimated at around Rs64 trillion, but integration with digital systems remains limited. Around 27,000 entities have been onboarded so far, with only a third actively sharing invoice data.

The FBR has set deadlines for businesses to integrate their sales systems with tax authorities, but these timelines have been repeatedly missed. The latest target is to complete integration by June this year. Businesses have raised concerns over the system, prompting adjustments such as allowing bulk uploads, invoice corrections within 72 hours, and multiple service providers.

The IMF monitors programme performance through quantitative and structural conditions. More than 60 conditions have already been imposed in previous reviews.

Pakistan and the IMF have yet to reach a staff-level agreement after recent talks, with differences persisting over taxation, budget measures, and fuel pricing. Officials said the proposed conditions are aimed at linking enforcement actions with measurable revenue outcomes.

The FBR has also missed key targets, including overall tax collection and revenue from the retail sector during the first half of the fiscal year.