Pakistan’s tax-to-GDP ratio hits record high as PM urges faster FBR digitisation

ISLAMABAD: Prime Minister Shehbaz Sharif has expressed satisfaction with the ongoing reforms in the Federal Board of Revenue (FBR), terming the improvements in the tax system “welcome,” as the number of tax filers rose to over 7.2 million and the tax-to-GDP ratio posted a historic 1.5 per cent increase in 2025 compared to the previous year.

He directed that measures be taken within a specified timeframe to create a tax system aligned with modern requirements.

The prime minister made these remarks while chairing a review meeting on the FBR’s ongoing reforms.

The prime minister lauded the FBR’s digitistion efforts for assisting in achieving targets and instructed that steps be taken to establish a sustainable system on a permanent basis.

He emphasized the need for further enforcement measures to curb the informal economy.

The prime minister also directed the FBR to develop a comprehensive action plan for the re-establishment of its digital wing, including defining timelines for achieving targets.

He also said that consultations with all stakeholders, including businesses, traders, and taxpayers, must be ensured, and their suggestions be incorporated into the reform process.

He clarified that increasing national revenue through an improved tax system and reducing the tax burden on the common person are among the top priorities.

The meeting was given a briefing on the FBR’s reforms, the results of its initiatives, and the targets for the previous fiscal year.

It was reported that due to the FBR’s enforcement measures and other reforms, there has been a historic 1.5 per cent increase in the tax-to-GDP ratio in 2025 compared to 2024.

The briefing further stated that the number of tax filers increased from 4.5 million in 2024 to over 7.2 million by June 30, 2025.

The FBR’s faceless customs clearance system has not only increased tax revenue but will also reduce clearance time from 52 hours to just 12 hours within the next three months.

In the retail sector, an additional Rs455 billion in income tax was collected by June 30, 2025, compared to 2024.

This increase was attributed to the implementation of point of sales (POS) systems, the integration of retailers’ systems with the FBR, and enhanced enforcement.

A special system for reviewing the faceless system has been introduced, where cases are being decided promptly via video link.

According to the briefing, these measures have led to a 2.16 per cent reduction in the weighted average tariff on imports, which will decrease raw material costs for industries and facilitate the manufacturing sector.

The meeting was told that suggestions from international experts will also be incorporated into tax reforms and the digitalization of economic sectors.

Existing data will be utilised more effectively for the registration of industrial production phases with government agencies.

The prime minister commended the efforts of FBR officials and personnel involved in the reform process, directing them to present actionable targets and timelines for the proposed suggestions next week.