FBR misses tax target by PKR 335 billion in first half of FY26

Pakistan’s Federal Board of Revenue (FBR) recorded a tax collection shortfall of PKR 335 billion in the first half of the 2025-26 fiscal year, failing to meet its July-December revenue target, according to official sources.

The FBR had set a tax collection target of PKR 6,490 billion for the first six months of the fiscal year but collected about PKR 6,155 billion, resulting in the shortfall, the sources said. Provisional data showed that tax revenues in December reached PKR 1,425 billion, missing the monthly target of PKR 1,446 billion by around PKR 21 billion.

During the July-December period, the FBR paid out PKR 292 billion in tax refunds, officials said.

A breakdown of collections showed that more than PKR 3,026 billion was collected through income tax, while sales tax revenues stood at PKR 2,086 billion in the first half of the fiscal year. Collections from federal excise duty totaled PKR 400 billion, and customs duty receipts exceeded PKR 642 billion during the same period.

Sources also reported an increase in income tax return filings. More than seven million income tax returns were filed between July and December of the current fiscal year, compared with about 5.2 million returns filed during the same period last year.

In light of the revenue performance, the government has revised the FBR’s annual tax collection target for 2025-26 downward. The target has been reduced to PKR 13,979 billion from the earlier estimate of PKR 14,307 billion, a cut of PKR 328 billion, officials said.

The revised targets reflect ongoing challenges in meeting revenue goals amid economic pressures, even as authorities point to improved tax compliance and higher return filings as signs of gradual progress.

FBR revenue collection during FY25 stood at PKR 11,744.3 billion, compared with PKR 9,299.1 billion in FY24, reflecting an increase of PKR 2.4 trillion in a single year. Revenue growth during FY 25 was 26.3%.

After witnessing a stagnant tax-to-GDP ratio averaging 8.7% over the past 10 years, concerted and programmatic policy interventions, along with oversight by top management, have begun to pay dividends. As a result, the country recorded a double-digit tax-to-GDP ratio of 10.3%.

Sectors of the economy with a major share in revenue collection experienced slow growth during FY25. However, FBR revenue collection in these sectors remained resilient, with an upward trend recorded across all four revenue heads.

During the period FY16 to FY21, the average ratio of direct to indirect taxes was 38% to 62%. A policy shift aimed at transferring the tax burden from less advantaged segments of society to those with greater capacity to pay proved successful. The share of direct taxes increased from 37.2% in FY22 and reached 49.3% in FY25.