FBR has missed its revised tax target by Rs 450 billion, raising tough IMF questions and forcing the government to rely on higher oil levies and cuts in development spending.
Why FBR’s Rs 450 Billion Shortfall Matters
In the first eight months of fiscal year 2025–26, the Federal Board of Revenue (FBR) collected just under Rs 8.1 trillion in taxes. This amount is about Rs 450 billion less than the already revised target, and around Rs 670 billion below the original annual plan. The continued gap shows that, even after getting more powers and fiscal incentives, the tax machinery is still struggling to meet its goals.
The government had first set the full-year FBR target at Rs 14.13 trillion, but lowered it by Rs 216 billion after earlier review talks with the International Monetary Fund (IMF). Now, with another big shortfall appearing, FBR has reportedly moved a fresh proposal to cut the target once more. This will be discussed with the IMF in the upcoming review, where every rupee of revenue will be closely examined.
How the Government Is Covering the Gap
Instead of rapidly increasing the number of taxpayers, the federal government is mainly covering the revenue gap by raising petroleum levy rates and sharply cutting development spending. This helps it show a primary budget surplus, which is an important condition agreed with the IMF. On paper, the numbers look better, but in reality the burden shifts towards fuel consumers and slows down new projects, jobs and growth.
Multinational companies and leading local firms have told the visiting IMF team that honest, tax-compliant businesses are losing out to tax-evading competitors. They raised concerns that the current tax policy keeps the base narrow while loading more and more on the salaried class and formal sector. According to participants, the IMF mission chief Iva Petrova also accepted that widening the base quickly will be difficult, which means existing taxpayers may continue to face a heavy burden in the near term.
Breakdown of Collections: Income Tax, Sales Tax and Duties
Against a reduced target of about Rs 4.1 trillion, the FBR managed to collect roughly Rs 3.94 trillion in income tax, missing the goal by Rs 160 billion, even though this was 15% higher than last year. Sales tax collection reached around Rs 2.8 trillion, which is Rs 322 billion below target, despite an 11% year-on-year increase. Part of the weakness in sales tax is linked to advance collection practices, which may improve short-term numbers but do not fix the underlying problems.
On the indirect tax side, federal excise duty performed slightly better, touching about Rs 531 billion, which is Rs 6 billion above the revised target and 17% higher than last year. Customs duty, however, missed the mark by Rs 49 billion, with collections of nearly Rs 850 billion. Overall, the picture is of modest growth compared to last year, but still far below what is required to meet ambitious budget targets.
Super Tax, Court Rulings and Bank Openings
The Rs 8.1 trillion figure also includes about Rs 125 billion collected under the super tax. A recent decision by the Federal Constitutional Court in January helped FBR retain this amount; without it, total collection would have dropped below Rs 8 trillion. Even so, some of this super tax was taken in cases where payment had already been made in advance, meaning the net benefit is smaller than headline numbers suggest.
Because of the widening gap, the State Bank of Pakistan has asked banks to stay open on Saturdays for three straight months, hoping to squeeze out a bit more revenue from last-minute transactions. In a well-functioning tax and governance system, such instructions would be rare. This pressure comes despite the FBR having increased officers’ salaries by up to 400% and even distributing cars to motivate staff, yet the overall results remain disappointing.
What This Means for Provinces and Ordinary Pakistanis
Experts are warning that long-term underperformance in tax collection hurts not only the federal government but also the provinces. Musharraf Rasool Cyan, a technical member of the National Finance Commission from Khyber Pakhtunkhwa, recently said that FBR has collected around Rs 63 trillion less than what was expected under the 2010 NFC formula. At that time, Pakistan had promised to raise its tax-to-GDP ratio by one percentage point each year to reach 15% by 2015. Instead, it stood at only 10.2% last fiscal year.
For ordinary people, this weak performance usually translates into higher indirect taxes, costlier fuel, reduced development projects and continued pressure on the formal sector and salaried class. Provincial officials, such as the finance secretary of Sindh, have argued that Pakistan’s sales tax potential may be as high as Rs 11 trillion annually, yet FBR collects only 15% to 20% of that. They are now calling for shared collection responsibilities with provinces to improve efficiency. Unless the tax base is widened and enforcement is strengthened, Pakistan is likely to remain stuck in the cycle of missed targets, emergency measures and tough IMF talks.
