If the Federal Board of Revenue (FBR) continues to face declining tax collections in the second quarter of FY2025–26, the International Monetary Fund (IMF) may propose new emergency revenue measures.
Official sources told Business Recorder that the issue of FBR’s revenue shortfall was discussed in detail during ongoing policy-level talks between Pakistani authorities and the IMF review mission.
FBR informed the IMF that it collected PKR 2,885 billion during the first quarter (July–September) of FY2025–26, falling short of the PKR 3,083 billion target by PKR 198 billion. In September 2025 alone, collections stood at PKR 1,230 billion against a monthly target of PKR 1,368 billion — a shortfall of PKR 138 billion.
According to sources, FBR could face a revenue gap of over PKR 400 billion during FY2025–26, which may affect the achievement of the annual tax target.
The government had set an annual revenue collection target of PKR 14.13 trillion for FBR. However, the first quarter already saw a shortfall of PKR 198 billion. While discussions on revising the annual target are ongoing, no final decision has been made yet.
Finance Minister Muhammad Aurangzeb ruled out the possibility of a mini-budget, stating that no additional tax or revenue measures are currently under consideration. A senior FBR official also confirmed that no new tax proposals have been initiated so far.
FBR explained that ongoing reforms aim to strengthen institutional capacity. Around 1,600 auditors are being recruited to enhance audit capabilities, and digital production monitoring has been introduced in key sectors such as sugar, fertilizer, cement, beverages, tobacco, poultry, and textiles.
The transformation plan focuses on integrating data sources and digitizing processes to link economic activities with tax returns, improve detection of tax evasion, and reduce the tax gap. AI-driven risk-based auditing will also be introduced to make taxpayer selection more efficient. Officials highlighted that these technology-based measures aim to make FBR more transparent and accountable.
The ongoing transformation has increased FBR’s tax-to-GDP ratio from 8.8% in FY2023–24 to 10.24% in FY2024–25. The introduction of faceless customs appraisal, currently in its early phase, has already boosted revenue by 17.3% year-on-year. Strengthened enforcement has led to an eightfold increase in revenue collection through enforcement during FY2024–25 compared to the previous year.
The IMF, in its second and final review under the Stand-By Arrangement, listed eight prior emergency revenue measures with an annual revenue impact of PKR 216 billion. These include:
- Increasing sales tax for tier-one textile and leather sectors from the reduced 15% to the standard 18%.
- Imposing a PKR 5 per kg levy on sugar.
- Increasing advance income tax on machinery imports by 1 percentage point.
- Raising advance income tax on industrial raw material imports by 0.5 percentage points.
- Raising advance income tax on raw material imports by commercial importers by 1 percentage point.
- Increasing withholding tax on supplies by 1 percentage point.
- Increasing withholding tax on services by 1 percentage point.
- Increasing withholding tax on contracts by 1 percentage point.
