FBR faces Rs601 billion revenue shortfall, struggles to meet annual target

ISLAMABAD: The Federal Board of Revenue (FBR) is grappling with a substantial shortfall in revenue collections for the fiscal year 2024-25, as it fell Rs601 billion short of its target during the first eight months.

From July to February, the FBR managed to collect Rs7,346 billion, significantly lower than its target of Rs7,947 billion. In February alone, Rs850 billion was collected, which also missed the set goal of Rs983 billion, widening the gap by Rs133 billion.

To meet its annual target of Rs12,970 billion, the FBR now faces the daunting task of raising an additional Rs5,624 billion in the remaining four months. However, officials acknowledge that they are already bracing for an overall shortfall of more than Rs600 billion by the end of the fiscal year.

Despite this situation, the FBR has been working to assure the International Monetary Fund (IMF) of its commitment to meet its targets.

Officials have outlined efforts focused on improving enforcement, boosting audits, and accelerating the resolution of court cases that hold around Rs2.7 trillion in potential revenue. These efforts are aimed at closing the gap and salvaging as much revenue as possible.

One of the FBR’s proposals to generate additional income involves reducing tax rates on key sectors like beverages, tobacco, and real estate. The idea behind this approach is to stimulate higher transaction volumes, which could bring in over Rs100 billion between April and June 2025.

However, the IMF has rejected these tax relief suggestions ahead of the budget, citing concerns over their effectiveness in addressing the larger fiscal gap.

If the shortfall continues into May, contingency measures agreed upon with the IMF will come into play, expected to generate Rs216 billion.

These include raising taxes across various sectors, such as increasing sales tax on textiles and leather, and imposing additional taxes on imports of raw materials, machinery, and contracts. These steps reflect a broader strategy to claw back revenue in a challenging economic environment.

The FBR now faces an uphill battle in the final months of the fiscal year, and while its efforts are evident, the shortfall remains a looming concern for both the government and the IMF.

Read next: FBR seeks IMF approval for temporary tax reductions in tobacco, real estate, and beverages