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Aftab Maken
ISLAMABAD: FBR collected Rs 8.1tr in July-February, missing the revised target by Rs 450bn and raising the likelihood of another downward revision after IMF talks.
Pakistan’s Federal Board of Revenue has recorded a Rs 450bn revenue shortfall during the first eight months of fiscal year 2025-26, intensifying pressure on the government to revise its annual collection target for a second time.
Official sources said the FBR collected around Rs 8.1tr in taxes from July to February, falling Rs 450bn short of the revised target for the period. Against the original benchmark, the gap widens to Rs 670bn. The development comes as Islamabad prepares for another round of discussions with the International Monetary Fund next week.
At the start of the fiscal year, the FBR’s annual tax target was set at Rs14.13tr. Following negotiations with the IMF, the goal was reduced by Rs 216bn. Officials have now proposed a further significant cut in the target, citing weaker-than-expected revenue performance and economic constraints.
To offset the revenue gap, the federal government has increased the petroleum levy and sharply curtailed development spending. The measures aim to secure the primary budget surplus agreed with the IMF under the ongoing programme. However, economists argue that reliance on higher indirect levies and spending cuts creates a temporary fiscal cushion rather than sustainable stability.
The IMF has reportedly conveyed that expanding the tax net immediately would be challenging. During meetings with the visiting IMF delegation, business representatives raised concerns about sectors that continue to evade taxes and gain an unfair cost advantage. IMF Mission Chief Eva Petrova pointed to structural hurdles in rapidly broadening the tax base, according to officials familiar with the talks.
A significant component of the eight-month revenue includes Rs125bn collected under the super tax. Officials said collections would have remained below Rs8tr had a court verdict not favoured the FBR. Even so, the net financial impact of the super tax ruling is expected to be lower than originally projected.
A breakdown of revenue data shows income tax collections stood at Rs3.94tr against a revised target of Rs 4.1tr, leaving a gap of Rs160bn. Despite the shortfall, income tax receipts were 15% higher compared to the same period last year, reflecting nominal growth amid inflationary adjustments.
Sales tax collections amounted to Rs 2.8tr, missing the target by Rs 322bn. Analysts attribute the weak sales tax performance to subdued industrial activity and lower import volumes during the review period. Customs duties totalled Rs850bn, falling Rs49bn short of projections, partly due to import compression measures aimed at stabilising the external account.
In contrast, federal excise duty collections reached Rs 531bn, exceeding the target by Rs 6bn. The modest surplus in excise revenues provided limited relief against the broader tax gap.
Pakistan’s fiscal framework remains closely tied to IMF benchmarks under the Extended Fund Facility. The government has committed to achieving a primary budget surplus while containing the fiscal deficit. According to the State Bank’s latest monetary policy statement, tight financial conditions and controlled imports have moderated demand but also constrained tax-generating activity.
With four months remaining in the fiscal year, the FBR faces mounting pressure to accelerate collections without stifling fragile economic recovery. Any further downward revision of the annual target will require IMF concurrence, making the upcoming negotiations critical for Pakistan’s fiscal outlook and the credibility of its revenue reform agenda led by the FBR.
