The Federal Board of Revenue (FBR) is facing a steep shortfall of Rs 1 trillion to meet its tax collection target of Rs 6.009 trillion for the July-December period, a key condition under Pakistan’s agreement with the International Monetary Fund (IMF).
Finance Minister Muhammad Aurangzeb expressed hope during a press conference on Thursday that the IMF program would continue but avoided confirming whether a mini-budget or revised tax targets were on the horizon.
As of Thursday, the Fed had raised just 5 trillion rupees, barely 50% of its monthly target of 1.37 trillion rupees. With only five days left until December, the IRS is under enormous pressure to fulfill its obligations to the International Monetary Fund, under which it also recently implemented Policies targeting marriage halls And other sectors to expand the tax base.
Aurangzeb pointed out that although efforts to expand the tax base continued, some economic and political assumptions had not been met, leading to a widening of the gap.
FBR Chairman Rasheed Langrial shared that out of 169,390 notices sent to high-income earners, only 38,002 responded, collectively contributing Rs377.6 million in taxes – an average of just Rs9,920 per filer. Langreal revealed that the government’s unpaid tax liabilities amount to Rs 1.6 trillion, most of which are from the top 5% of income earners.
Now the annual tax target of 13 trillion rupees looks out of reach, with 40% growth forecasts proving overly ambitious. In the last fiscal year, tax collection growth was 29%, far below this year’s requirements.
Aurangzeb hinted at possible settlements with commercial banks regarding the additional 15% advance-to-deposit ratio tax. However, non-applicants remain a challenge, as they continue to conduct transactions legally, except in specific cases such as purchasing property or vehicles.
Langreal admitted that there were loopholes in the sales tax law, allowing companies with annual sales of less than 100 million rupees to avoid registration. While legislation has been introduced to address non-compliance, the tax potential of 95% of the population remains meager at Rs 140 billion.
The IMF will closely review December’s tax data to decide on Pakistan’s future fiscal path. A mini-budget remains a possibility, with potential new taxes on imports, contractors and other sectors under consideration.
Despite the challenges, Aurangzeb reiterated the government’s commitment to its commitments with the International Monetary Fund, stressing efforts to avoid surprises that could disrupt the ongoing programme.
With Pakistan already suffering from unprecedented tax measures and a widening fiscal gap, the coming days will determine whether more revenue-boosting measures will be implemented to plug the deficit.