Pakistan misses tax collection target by PKR 470 billion in seventh months

The Federal Board of Revenue (FBR) in Pakistan has fallen short of its tax collection target by PKR 470 billion ($1.7 billion) for the first seven months of the current fiscal year, 2024-25.

According to details, the FBR collected PKR 6.494 trillion from July to January, against a target of PKR 6.964 trillion, resulting in a gap of PKR 470 billion.

In January 2025, the FBR's tax collection stood at PKR 872 billion, missing the target of PKR 956 billion and showing a shortfall of PKR 84 billion.

Advisor to the Federal Minister, Khurram Schehzad, stated in a message that this collection represents an achievement slightly below one-third of the collection target for the third quarter.

Schehzad expressed optimism that the FBR is on track to achieve the quarterly target for the January-March 2025 period.

The income tax growth for January 2025 was recorded at 28%, sales tax at 29%, Federal Excise Duty (FED) at 34%, and custom duties at 30%.

He said for the first time this year, the collection from custom duties has shown significant growth, indicating a recovery in economic activity.

This brings the FBR's seven-month growth to 26%, suggesting a 15% real growth in taxes and an improved tax-to-GDP ratio.

It's important to note that the FBR experienced a shortfall of PKR 384 billion during the first half of the fiscal year due to a slowdown in revenue collection anticipated at the time of the budget.

The assessment of the revenue collection pattern revealed that factors contributing to the shortfall included exchange rate stability, lower-than-expected inflation, a slow recovery in the large-scale manufacturing sector, and a lower-than-expected GDP growth rate.

Policy measures adopted in the Finance Act 2024, totaling PKR 1.3 trillion, have also shown less-than-expected collection due to behavioral changes in sectors like real estate and trading, as well as estimated errors.

In the first half of the fiscal year, the loss on account of policy measures was calculated at PKR 251 billion, which is expected to rise to PKR 539 billion unless corrective actions are taken.

This trend is likely to continue in February 2025; however, growth is expected to pick up in the last four months of the fiscal year, preventing further revenue loss due to autonomous growth from March to June 2025.