IMF may push for new tax measures if FBR continues to miss targets

ISLAMABAD: Pakistan’s tax troubles might trigger another round of International Monetary Fund (IMF)-led revenue measures, as the global lender closely monitors the Federal Board of Revenue’s (FBR) sluggish collection in FY2025-26.

According to sources quoted by Business Recorder, the issue of revenue shortfall was a key part of discussions during the IMF’s ongoing policy-level talks with Pakistani authorities.

Revenue gap widens

During the first quarter (July-September) of FY2025-26, the FBR collected Rs2.885 trillion against the target of Rs3.083 trillion, leaving a shortfall of Rs198 billion. In September alone, the board managed to collect Rs1.23 trillion compared to the monthly goal of Rs1.368 trillion.

Officials warned that the total shortfall could exceed Rs400 billion by the end of the fiscal year, potentially forcing the government to revise the annual target of Rs14.13 trillion. So far, however, no decision has been made on any downward revision.

Finance Minister Muhammad Aurangzeb has publicly ruled out the possibility of a mini-budget, stating that no new taxation or revenue measures are under consideration at this stage. “Till now, no working on new taxation measures has been started in the FBR,” a senior official confirmed.

Focus on reforms and digital transformation

The FBR said it is focused on strengthening tax administration instead of introducing new taxes. Around 1,600 auditors are being recruited to improve audit capacity, while digital monitoring has been rolled out in key sectors such as sugar, cement, beverages, fertiliser, and textiles.

The board’s Transformation Plan aims to integrate data sources, digitise processes, and use artificial intelligence for audit selection. These changes, officials say, will help catch tax evaders and close the tax gap.

As a result of ongoing reforms, the FBR’s tax-to-GDP ratio rose from 8.8 percent in FY2023-24 to 10.24 percent in FY2024-25, while enforcement revenue increased eightfold.

IMF’s earlier proposals

The IMF’s previous review under the Stand-By Arrangement had outlined eight contingency measures worth Rs216 billion annually. These included raising sales tax rates for textile and leather sectors, introducing a FED on sugar, and increasing various advance income and withholding taxes on imports, services, and contracts.

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