FBR misses tax target for FY2024-25 by Rs1.2 trillion

The Federal Board of Revenue (FBR) has failed to meet its ambitious tax target for fiscal year 2024-25, falling short by a record Rs1.2 trillion. The tax target was set at Rs13 trillion, but FBR’s provisional collection reached Rs11.73 trillion by the end of the fiscal year on June 30, a 26% increase from the previous year, yet still below the set goal.

The FBR’s collection for June also fell short by Rs180 billion, reaching only Rs1.49 trillion despite advances and reduced tax refunds.

Despite imposing new taxes and increasing the petroleum levy to a record Rs78 per liter, the government couldn’t close the gap. The tax-to-GDP ratio remained slightly over 10%, missing the commitment made to the International Monetary Fund (IMF) to increase it to 10.6%.

The shortfall is larger than the one observed in fiscal year 2019-20, when the economy was impacted by the COVID-19 pandemic. 

The government placed an additional burden on the salaried class and taxed essential goods such as packaged milk to reach the target of Rs12.97 trillion in taxes. However, the slowing economy and declining inflation hindered the FBR’s ability to meet its collection goals.

The government was also unable to meet its commitments for income tax collection from the Tajir Dost Scheme, falling far below the target of Rs50 billion.

A tax breakdown shows that the FBR exceeded its income tax target by Rs340 billion, collecting nearly Rs5.8 trillion, but missed targets in other key areas. 

Sales tax collection stood at Rs3.9 trillion, falling short of the target of Rs4.9 trillion. Federal excise duty collection amounted to Rs767 billion, below the target by Rs187 billion. Customs duties also missed their target, collecting Rs1.28 trillion, which was Rs315 billion less than expected.

The IMF’s pressure for new taxes, particularly on the salaried class and essential goods, contributed to the government’s tax policies. Despite these measures, tax collection remains below the required levels for fiscal sustainability.

For the fiscal year 2025-26, the government has set a new target of Rs14.13 trillion, requiring a 20% growth in tax collection.