FBR misses first quarter tax target by Rs198 billion

Pakistan’s Federal Board of Revenue (FBR) has provisionally collected Rs2.88 trillion in tax revenue during the first quarter of the fiscal year 2025-26, falling short of its target of Rs3.083 trillion by Rs198 billion, according to the data released on Wednesday.

In September 2025 alone, the FBR collected Rs1.23 trillion, missing its monthly target of Rs1.368 trillion by Rs138 billion. The shortfall reflects continued challenges in meeting the set revenue targets despite efforts to increase collections.

First-quarter collections increased by just Rs328 billion, or nearly 13%, compared to the same period last fiscal year—a pace deemed insufficient to meet annual targets. 

The FBR also fell short by Rs138 billion in collection of the IMF’s conservative target of Rs3.023 trillion, highlighting persistent weaknesses in the authority’s capacity to stabilise government finances.

The IMF was briefed on these shortfalls during the kickoff of the second programme review, with Mission Chief Iva Petrova requesting updates on the FBR’s transformation plan. 

Tax breakdown shows that the FBR collected Rs1.363 trillion in income tax in the first quarter, missing the three-month target by Rs96 billion, though the collection was 11% higher than last year. 

Income tax return filings also lagged behind expectations. Under the law, the original deadline to submit annual returns was September 30, unless extended by the FBR.

Of the 7.7 million returns filed for tax year 2024, just over 4 million had been submitted by the first deadline. While this represented an increase of approximately 450,000 compared to the same period last year, the FBR received only Rs80 billion in income tax, about Rs18 billion less than the previous year’s comparable collection. 

To bridge the gap, the FBR extended the filing deadline by 15 days, aiming to bring submissions closer to last year’s total. Despite introducing measures targeting non-filers and late filers, and restricting major economic transactions for ineligible individuals, the authority struggled to secure timely compliance from taxpayers.

Sales tax collections reached Rs1.02 trillion, Rs122 billion below the target but 13% higher than the same period last year. Federal excise duty receipts amounted to Rs190 billion, slightly exceeding the target, while customs duty collections stood at Rs312 billion, up 13% despite reduced import taxes in the budget. 

Customs outperformed the Inland Revenue Service, easing concerns that regulatory duty reductions might affect import-stage revenues. Refunds for the quarter totaled Rs157 billion, slightly higher than Rs147 billion in the same period last year.

Overall, the FBR continues to struggle to meet its targets, with monthly collections of Rs1.229 trillion falling short of the Rs1.383 trillion benchmark, reflecting modest growth despite low refund outflows and enforcement efforts.

Last year, the FBR missed its annual target by Rs1.2 trillion, and the slow start this fiscal year could complicate efforts to meet the Rs14.13 trillion target for FY26, which requires roughly a 20% year-on-year increase.