IMF Lowers FBR Revenue Target to Rs. 13.98 Trillion. Pakistan tax framework is under fresh review again. The International Monetary Fund (IMF), in its latest assessment, has revised Pakistan’s revenue collection target for FY2025-26 to Rs. 13.98 trillion, down from the Rs. 14.30 trillion originally set by the government in the federal budget.
This change comes during the IMF Second Review under the Extended Fund Facility (EFF) and reflects both the economic pressures and the government’s efforts to stabilize revenues.
Why the IMF Revised the Tax Target
The IMF noted that Pakistan has made progress over the past year. Tax revenues at the federal and provincial levels have now crossed 12% of GDP, which is a significant improvement compared to previous years.
However, the IMF believes the Rs. 14.3 trillion target was too ambitious, considering the pace of reforms, slow economic activity, and structural weaknesses inside the tax system.
The revised goal of Rs. 13.98 trillion is more aligned with current realities, but the IMF stressed that Pakistan must continue pushing reforms if it wants long-term financial stability.
Pakistan Long-Term Tax-to-GDP Goal: 15%
The IMF report highlights a key target:
Pakistan aims to increase its tax-to-GDP ratio from 12% to 15% in the coming years.
Reaching 15% is critical because it would:
- Reduce external and domestic debt
- Boost investment in education, healthcare, and infrastructure
- Allow more space for growth-focused development spending
- Improve Pakistan’s financial credibility globally
Without stronger tax revenue, Pakistan remains dependent on borrowing and external support.
How FBR Plans to Strengthen Tax Collection
The Federal Board of Revenue (FBR) has already launched several measures to increase revenue. According to the IMF, these actions are showing early results.
1. More aggressive tax audits
FBR is expanding audits to identify underreporting and tax evasion across sectors.
2. Digital invoicing & POS expansion
Sales tax collection is being improved through:
- Wider installation of Point-of-Sale (POS) terminals
- Mandatory digital invoicing for more businesses
- Real-time tracking of transactions
This reduces manual fraud and increases transparency.
3. Stronger withholding tax enforcement
The IMF notes improvements in withholding tax collection, one of Pakistan’s largest tax sources.
4. Public awareness campaigns
FBR has intensified outreach to encourage:
- More tax filings
- Updating NTN profiles
- Compliance among retailers and small businesses
5. Physical monitoring of production
Sectors like sugar, cement, beverages, and tobacco — where tax leakage is common — are now monitored through:
- Digital production tracking
- On-ground inspections
- Technology-based surveillance
FBR New Roadmap with IMF Support
To streamline its reforms, the FBR is preparing a comprehensive compliance roadmap, supported by IMF capacity development.
This roadmap includes:
- Clear timelines
- Priority action areas
- Restructuring of compliance units
- A phased approach to implementing large-scale reforms
The IMF states that Pakistan will fully implement at least three priority reforms within the revised timeline, reflecting urgency in strengthening revenue systems.
Why This Update Matters for Citizens and Businesses
The IMF’s revision does not directly change tax rates. However, it signals that:
1. Tax enforcement will intensify
More businesses will be brought into the tax net. Non-filers and under-filers should expect stricter monitoring.
2. Digital tax compliance is the new focus
Cash-based transactions will gradually shrink as Pakistan shifts toward documented, digital systems.
3. Economic pressure remains
Lower tax collection targets show the economy is still struggling, which may influence:
- Inflation trends
- Budget priorities
- Government subsidies
- Future IMF conditions
4. Development spending depends on tax growth
If tax revenues rise, sectors like education, public health, and infrastructure will benefit.
Conclusion
The IMF’s downward revision of Pakistan’s tax target to Rs. 13.98 trillion for FY26 reflects a realistic approach, not a retreat. Pakistan still needs strong, consistent reforms to widen the tax base, modernize collection systems, and reduce dependence on loans.
For long-term stability, improving tax compliance, increasing transparency, and strengthening digital systems remain the core pillars of Pakistan’s revenue strategy.
