Pakistan is once again struggling to meet its tax targets, and the International Monetary Fund (IMF) has raised serious concerns over both tax governance and conflict-of-interest issues within the Federal Board of Revenue (FBR). During the first five months of fiscal year 2025–26 (July to November), FBR recorded a massive tax shortfall of Rs. 428 billion, creating fresh pressure on the government’s economic agenda.

This detailed article explains why the tax shortfall happened, how IMF reacted, the impact on businesses, and what Pakistan must do to stabilize its revenue system.

Pakistan Misses Tax Target by Rs. 428 Billion — What Went Wrong?

FBR collected Rs. 4.715 trillion from July to November 2025, against the revised target of Rs. 5.14 trillion. This is a clear shortfall of Rs. 428 billion, showing that the revenue system is failing to meet expectations despite new taxes, increased enforcement, and digital monitoring.

Breakdown of Revenue Performance

Income Tax Collection:
Target missed by Rs. 177 billion — lower profits, weak documentation, and higher tax evasion contributed to the shortfall.
Sales Tax Collection:
Remains the biggest gap. Against a higher target, FBR collected only Rs. 1.67 trillion, mainly due to weak retail sector documentation and reduced consumer spending.
Federal Excise Duty (FED):
Generated Rs. 326 billion, still slightly below target. Industries hit by inflation and high input costs reduced production.
Customs Duty:
Collection reached Rs. 520 billion, slightly above target due to increased imports and higher valuation rates.

Even though customs duty performed slightly better, the overall revenue situation remains worrying.

IMF Raises Red Flag: “Conflict of Interest Inside Tax Administration”

According to IMF, the biggest threat to Pakistan’s revenue system is not only low tax collection but also structural governance issues inside FBR.

Key IMF Concerns

1. Lack of Permanent Leadership

Pakistan still does not have a permanent Member Inland Revenue Operations (MIR).
The temporary charge given to Dr. Hamid Ateeq Sarwar expired in mid-November, and no replacement was announced.

This leadership vacuum has disrupted:

Policy implementation
Enforcement drives
Monitoring operations
Digital tax initiatives

IMF warns that without strong leadership, tax reforms cannot work.

November 2025 Alone Shows Rs. 157 Billion Shortfall

In November, FBR managed to collect Rs. 878 billion, far below the target of Rs. 1.035 trillion. This is a shortfall of Rs. 157 billion in just one month.

Officials claim that if some pending payments arrive over the weekend, the gap may shrink slightly — but the month is still considered a major miss.

To boost weekend tax inflows, the State Bank of Pakistan ordered commercial banks to stay open on Saturday for revenue collection.

Why Is Pakistan Struggling to Meet Tax Targets?

There are multiple reasons behind this consistent shortfall:

1. Higher Taxes But Low Compliance

Despite increasing taxes, the government has failed to increase documentation in:

Retail markets
Real estate
Wholesale sector
Import/export businesses

Many traders continue to resist registering with the FBR system.

2. Economic Slowdown

Inflation, high electricity bills, and reduced purchasing power have resulted in:

Lower sales tax
Lower income tax
Reduced business profits

3. Fear of Over-Enforcement

Businesses say FBR is focusing more on raids and penalties instead of simplifying the tax system.

4. Policy Uncertainty

Constant changes in tax rules, withholding slabs, and reporting procedures discourage compliance.

Businesses React: “We Cannot Survive More Taxes”

Business groups and chambers across Pakistan have strongly protested repeated tax hikes in the current fiscal year.

The Special Investment Facilitation Council (SIFC) National Coordinator Sarfraz Ahmad confirmed that businesses are under severe pressure due to:

Higher sales tax
Higher income tax
Property valuation hikes
Expensive raw materials
High inflation

He said the government is working on reducing tax burden and introducing smoother digital systems.

IMF’s Warning: Pakistan Must Fix Tax Governance

IMF says Pakistan must address the following:

Remove conflict-of-interest inside FBR

Several senior officers are handling multiple roles, causing conflicts in decision-making.

Appoint permanent leadership

Important positions remain vacant for months.

Improve transparency

IMF has repeatedly urged Pakistan to publish tax data and audit reports publicly.

Increase accountability

IMF believes the core issue is governance, not just collection.

Impact on Pakistan’s Economy

The latest shortfall puts pressure on:

Fiscal deficit
IMF program performance
Government budget for development projects
Exchange rate stability

Reduced tax collection means the government will need to:

Borrow more
Cut spending
Increase taxes further
Privatize more state-owned entities

This can worsen inflation and weaken economic recovery.

Will the Government Meet Full-Year Tax Target?

Experts believe that meeting the annual target will be challenging unless:

Imports increase
Businesses recover
Retail taxation becomes effective
Digital POS integration expands

If the trend continues, Pakistan may miss the full-year target by Rs. 700–900 billion, creating serious fiscal pressure.

What Needs to Be Done Immediately?

1. Fill Key FBR Positions

Leadership gaps create delays and mismanagement.

2. Expand Retail Taxation

POS machines must be mandatory for large stores, wholesalers, and restaurants.

3. Reduce Over-Taxation

Instead of increasing tax rates, the government should expand the tax base.

4. Eliminate Corruption

Taxpayer trust must be restored for compliance.

5. Strengthen Digital Systems

End manual invoicing and shift entirely to e-filing.

Public Reaction: Growing Frustration Over Endless Taxes

Citizens are questioning why the government:

Keeps raising taxes
Still fails to meet targets
Still fails to broaden the tax net
Still faces governance issues

People demand that tax reforms should target elite groups, not ordinary consumers.

Conclusion

The Rs. 428 billion tax shortfall is a clear sign that Pakistan needs deep structural reforms, not just temporary tax increases. IMF’s warnings about conflict-of-interest inside FBR highlight a bigger problem — governance, transparency, and accountability.

For Pakistan to stabilize its economy, it must build a fair, modern, and transparent tax administration that encourages compliance instead of fear. Until then, revenue gaps will continue, and the economy will remain under pressure.

Frequently Asked Questions (FAQs)

1. What is Pakistan’s current tax shortfall?

Pakistan has missed its July–November tax target by Rs. 428 billion.

2. What did the IMF warn about?

IMF flagged conflict-of-interest issues and leadership gaps inside FBR.

3. Why did tax collection decline?

Economic slowdown, weak compliance, high inflation, and mismanagement.

4. Which tax category missed the target most?

Sales tax and income tax showed the biggest gaps.

5. What is the impact on the economy?

Higher fiscal deficit, more borrowing, possible new taxes, and IMF pressure.