Pakistan Tax Deficit Hits Rs725B, IMF Revises Target, New Levies Imposed

Pakistan’s tax revenue for the first nine months of FY 2024-25 (July-March) fell Rs725 billion short of the target, despite a 28% year-on-year increase in collections. The shortfall worsened in March alone by over Rs100 billion, pushing the government further away from its commitment to cap the deficit at Rs640 billion, as per recent reports.

The Federal Board of Revenue (FBR) recorded Rs8.44 trillion in tax collections by the end of March, well below the Rs9.17 trillion target for the period. This ongoing deficit has complicated the government’s fiscal management, especially with the IMF’s upcoming review.

In response, the IMF lowered the annual revenue target from Rs12.97 trillion to Rs12.33 trillion, citing sluggish economic growth and inflation. However, the tax-to-GDP ratio goal of 10.6% remains unchanged.

For March, the FBR aimed to collect Rs1.219 trillion but managed only Rs1.1 trillion, despite tightening refund payments and expediting tax collection efforts.

Under IMF pressure, Pakistan has broadened its tax base, imposing levies on medical tests, milk, vegetables, and children's products. Yet, FBR still fell short in key revenue streams:

Sales Tax: Rs2.86 trillion (Shortfall: Rs656 billion)

Federal Excise Duty (FED): Rs537 billion (Shortfall: Rs143 billion)

Customs Duties: Rs926 billion (Shortfall: Rs208 billion)

To control the deficit, the government slowed down refunds, issuing Rs34 billion in March—52% less than last year. In total, Rs384 billion was refunded in nine months, only Rs6 billion more than the previous year.