The International Monetary Fund (IMF) Pakistan tax measures is stepping up its calls for Pakistan to roll out new tax measures after a significant shortfall in the Federal Board of Revenue’s (FBR) collections. The FBR reported a revenue shortfall of Rs. 198 billion in the first quarter of the fiscal year 2025–26, managing to collect Rs. 2.89 trillion against a target of Rs. 3.08 trillion. In September, the collection also fell short, with Rs. 1.23 trillion raised compared to a target of Rs. 1.37 trillion.
Reports suggest that the FBR might face a revenue shortfall exceeding Rs. 400 billion for the 2025–26 fiscal year. This situation has raised alarms within the IMF, which is now pushing Pakistan to introduce additional tax measures to close the gap and maintain fiscal stability.
Several factors have played a role in this revenue shortfall, including lower-than-expected inflation, sluggish economic growth, and a downturn in the real estate sector. These issues have diminished the effectiveness of new tax measures, which brought in just over Rs. 800 billion, falling short of the anticipated Rs. 1.2 trillion.
In light of the shortfall, the IMF has suggested several strategies to boost tax revenue:
- Taxation of Farm Inputs: The IMF has proposed increasing the excise duty on fertilizers to 10% and introducing a 5% duty on pesticides to help bridge the projected revenue gap of Rs. 400–500 billion for the fiscal year.
- Addressing Pending Tax Cases: The IMF has stressed the importance of resolving over Rs. 1 trillion in pending tax cases to enhance revenue collection and minimize delays caused by litigation.
The Pakistani government has voiced concerns regarding the proposed tax measures, especially the taxation of farm inputs, highlighting the vulnerability of the agriculture sector after recent floods devastated farmland in Punjab. The government has requested to postpone these tax measures until the next fiscal year.
The pressure from the IMF on Pakistan to adopt new tax measures highlights the tough road ahead for the country in its quest for fiscal stability. How the government reacts and the results of the ongoing talks with the IMF will be key in shaping Pakistan’s economic path in the months to come.
Also read, World Bank Pakistan GDP Forecast Revised to 2.6% Amid Flood Impact
