The International Monetary Fund (IMF) has expressed dissatisfaction with the performance of the Federal Board of Revenue (FBR) and stressed the urgent need to expand tax base.
Documents reveal that FBR faced a tax revenue shortfall of Rs336 million in the first 6 months of the ongoing fiscal year, rising to Rs684 million over 10 months.
The IMF stated that the failure to meet tax targets reflects critically low number of registered taxpayers, making it essential to bring more businesses into the tax net.
Sources indicate the IMF has urged increased tax registration for shopkeepers and retailers, stressing that large financial transactions should only be permitted for active income tax filers.
Tax collection from the power, oil, and gas sectors also fell below set targets, further widening the gap between projected and actual revenue for the current financial year.
To curb tax evasion, Pakistan has assured the IMF of introducing a new system covering digital invoicing and monitoring of factory production across key industrial and commercial sectors.
FBR has claimed that a new audit system will be introduced by August 2026, designed to ensure fair and transparent accountability of all registered taxpayers across the country.
The report noted that benefits from these reform measures are expected to materialise in the next fiscal year, while current efforts remain focused on existing registered taxpayers only.
Tax Exemption Cuts
The federal government plans to reduce income and sales tax exemptions in the budget to generate additional revenue and strengthen its overall fiscal position.
Budget preparations are underway, with authorities finalising tax policy changes and reforms, including exemption cuts expected to yield revenue equal to 0.15 percent of GDP.
An additional 0.15 percent of GDP will be raised through the structural reforms of Federal Board of Revenue, with total extra revenue projected to reach Rs7,022 billion.
The budget will include permanent tax policies, improved collection systems, and IMF-backed measures to boost revenues by 0.3 percent of GDP and expand overall tax base.
