FBR Misses Tax Target by Rs864 Billion as New Budget May Bring More Taxes

Pakistan's tax authority, the Federal Board of Revenue (FBR), has recorded a massive revenue shortfall of Rs864 billion during the first 11 months of the current fiscal year, raising concerns ahead of the upcoming federal budget.

With tax collection remaining below expectations, the government is now considering several new revenue measures to meet its commitments with the International Monetary Fund (IMF) and achieve next year's ambitious tax target of Rs15.264 trillion.

FBR Struggles to Meet Revenue Goals

According to provisional figures, the FBR collected Rs11.232 trillion in taxes between July and May of the current fiscal year. However, this amount remained Rs864 billion below the revised target.

To achieve the downgraded annual target of Rs13.98 trillion, the tax authority now needs to collect approximately Rs2.75 trillion in June alone, requiring average daily collections of Rs91.6 billion.

The original tax collection target for the fiscal year was Rs14.130 trillion.

Government Considering New Tax Measures

Sources indicate that the government is reviewing several taxation proposals as part of efforts to generate an additional Rs215 billion in revenue.

Among the proposals under consideration are:

• Higher withholding taxes on selected imported goods
• Changes in income tax rates for wholesalers
• Sales tax collection on fast-moving consumer goods based on market prices
• Increasing sales tax on plug-in hybrid vehicles to 18%

The government is also evaluating a 20% windfall gain tax on oil sector companies.

Relief for Small Traders Under New Proposal

One proposal that may benefit small businesses involves a simplified taxation scheme for traders.

Under the proposed framework, traders with annual sales of up to Rs200 million may be required to pay a fixed 1% tax rate.

The government hopes this measure will improve compliance while broadening the tax base.

May Revenue Collection Also Falls Short

The FBR also missed its revenue target for May by a significant margin.

Against a monthly target of Rs1.150 trillion, the tax authority collected only Rs966 billion, resulting in a shortfall of Rs184 billion.

Revenue growth during May stood at just 3% compared to the same period last year.

FBR officials confirmed the monthly gap and acknowledged continued challenges in meeting collection targets.

Income Tax Leads Revenue Collection

Income tax remained the largest source of revenue during the July-May period.

The FBR collected Rs5.54 trillion in income taxes, representing a 13% increase compared to last year. However, the figure still remained Rs261 billion below target.

This collection includes super tax recovered after favorable court rulings during the fiscal year.

Sales Tax and Customs Duty Under Pressure

Sales tax collection reached Rs3.78 trillion, but remained Rs457 billion below the assigned target.

Similarly, customs duty collections stood at Rs1.18 trillion, falling short by Rs116 billion despite an increase in imports.

Federal Excise Duty (FED) collections totaled Rs745 billion, reflecting a 15% increase year-on-year, although collections still missed the target by Rs31 billion.

Hybrid Vehicles May Become More Expensive

The government is also considering ending reduced sales tax rates on hybrid vehicles after June 30.

Currently, hybrid vehicles up to 1,800cc are taxed at 8.5%, while vehicles between 1,801cc and 2,500cc attract a sales tax rate of 12.75%.

If the concession is not extended, these vehicles could face the standard 18% sales tax rate in the next fiscal year.

IMF Commitments Driving Budget Decisions

Officials say the government is narrowing down final tax proposals in consultation with the IMF.

The objective is to increase revenues while maintaining fiscal discipline and achieving agreed budget targets.

With a significant revenue gap and growing financial pressures, the upcoming federal budget is expected to introduce important tax policy changes that could affect businesses, importers, and consumers across Pakistan.