Pakistan Faces Rs606 Billion Tax Shortfall as IMF Targets Remain Unmet

Pakistan’s tax shortfall has expanded to Rs606 billion during the first eight months (July-February) of the 2024-25 fiscal year, as revenue collection lagged behind the IMF-mandated target despite a strong 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, which has created significant fiscal challenges for the government.

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

Although revenue collection increased by Rs1.65 trillion compared to last year, the government's taxation policies and unrealistic revenue assumptions have intensified pressure on tax authorities to meet the ambitious annual target of nearly Rs13 trillion.

The IMF has urged Pakistan to impose new taxes, which have heavily affected the salaried class and expanded levies on essential goods like medical tests, stationery, vegetables, and children’s milk. However, key tax collection areas fell short, except for income tax, which exceeded targets.

During July-February, income tax collection reached Rs3.52 trillion, surpassing the target of Rs3.25 trillion by Rs279 billion, and marking an increase of Rs835 billion from last year.

On the other hand, sales tax collection was Rs2.53 trillion, missing the target of Rs3.1 trillion by Rs579 billion, though it was still 13% higher than last year.

Federal excise duty collection totaled Rs467 billion, an increase of Rs124 billion compared to last year, but still Rs132 billion short of the Rs599 billion target, despite higher duties on cement, lubricant oil, and real estate transactions.

Similarly, customs duty collection amounted to Rs820 billion, falling Rs175 billion short of the target of Rs995 billion, despite a Rs98 billion increase from last year.

This growing shortfall highlights the government's struggle to meet IMF commitments, raising concerns about additional revenue measures that may be required in the coming months to address the gap.