Tax shortfall reaches Rs606 billion in eight months despite 28% revenue growth

Pakistan’s tax shortfall has widened to Rs606 billion in the first eight months (July-February) of the ongoing fiscal year 2024-25, as revenue collection remained below the International Monetary Fund (IMF)-mandated target despite an impressive 28% growth in Federal Board of Revenue (FBR) receipts. 

The FBR provisionally collected Rs7.342 trillion from July to February, falling short of the Rs7.95 trillion target, creating fiscal challenges for the government.

For the seventh consecutive month, the FBR failed to meet its monthly revenue target, collecting Rs845 billion in February—Rs138 billion short of the Rs983 billion target. 

While revenue collection improved by Rs1.65 trillion compared to last year, the government’s taxation policies and unrealistic revenue assumptions have placed increasing pressure on tax authorities to meet the annual target of nearly Rs13 trillion.

The IMF has pushed Pakistan to impose new taxes, which have significantly impacted the salaried class and expanded levies on essential goods, including medical tests, stationery, vegetables, and children’s milk. Despite these measures, key tax collection areas fell short, except for income tax, which surpassed targets.

During July-February, income tax collection reached Rs3.52 trillion, exceeding the Rs3.25 trillion target by Rs279 billion and showing an increase of Rs835 billion compared to last year. 

However, sales tax collection stood at Rs2.53 trillion, missing the Rs3.1 trillion target by Rs579 billion, despite being 13% higher than last year.

The federal excise duty collection was Rs467 billion, an increase of Rs124 billion from the previous year, but still Rs132 billion below the Rs599 billion target. This was despite higher duties on cement, lubricant oil, and real estate transactions. 

Similarly, customs duty collection reached Rs820 billion, missing the Rs995 billion target by Rs175 billion, despite a Rs98 billion increase compared to last year.

The widening shortfall underscores the government’s difficulty in meeting IMF commitments, raising concerns over additional revenue measures in the coming months to bridge the gap.