The Federal Board of Revenue’s repeated failure to meet its tax collection goals has once again unmasked a deeper fiscal disorder that extends far beyond faulty forecasts.
This year, overblown assumptions regarding import volumes, inflation, and economic momentum led to bloated targets that proved impossible to meet. Yet the real fault line lies not in the projections alone, but in a tax structure that leans heavily on salaried workers and formal businesses, while allowing vast, high-earning sectors like retail, agriculture, and real estate to roam largely untaxed.
Despite a record Rs5.8 trillion contribution from the salaried class and corporations, the imbalance in fiscal burden continues unchecked. The political class lacks the will to challenge its own support base, leaving meaningful reform untouched. Instead, the tax regime resembles high-tax Scandinavian systems in rate alone—offering none of their protections or public services in return.
The Federal Board of Revenue (FBR), the country’s primary fiscal lifeline, once again failed to meet its annual tax collection mandate for FY2024-25 — harvesting Rs11.7 trillion in receipts against an aspirational benchmark of Rs12.9 trillion. The revenue apparatus backpedaled twice over the year, first trimming the goal to Rs12.3 trillion, then settling at a more lenient Rs11.9 trillion — only to fall short of even that tempered figure by Rs163 billion.
This pattern of serial recalibrations and persistent underperformance betrays more than flawed arithmetic or short-sighted economic stewardship. Beneath the surface lies an entrenched malfunction — a structural rot gnawing at the very marrow of Pakistan’s tax regime.
Despite heavy-handed levies on salaried citizens and corporate entities, the taxation of everyday essentials, and a supposed digitization drive within the FBR, the machinery sputtered. Even the rollout of anti-smuggling crackdowns and supplementary tax tactics, valued at a staggering Rs1.3 trillion, couldn’t jolt the system into compliance. Consequently, the board also missed the IMF-mandated tax-to-GDP ratio of 10.6 percent — a red flag for international fiscal overseers.
Notably, the burden has been hoisted squarely onto the shoulders of wage-earners. The FBR extracted a record Rs545 billion in income tax from salaried individuals by June 30, 2025 — the lion’s share of direct tax contributions. This cohort paid over thrice as much as the nation’s dollar-earning exporters and coughed up eightfold the contribution made by retailers.
Exporters, whose foreign currency earnings should imply greater fiscal weight, contributed a relatively meager Rs180 billion. Retailers — shielded by cross-party political patronage — surrendered only Rs62 billion to the exchequer, laying bare the glaring imbalances in tax equity.
Yet, amid the glaring shortfall, a silver sliver glimmers: the year’s haul still reflects a 26% uptick over last year’s figures. This raises a piercing question — were the collection goals unrealistically inflated to begin with? Revenue forecasts often lean on assumptions tethered to volatile metrics — GDP trajectories, monetary policy swings, inflationary pressure, and the whims of IMF-influenced governance.
Ultimately, the FBR’s misfire doesn’t just expose its operational lethargy. It casts a harsh light on a taxation paradigm long in need of overhaul — where structural inertia, political cowardice, and fiscal myopia continue to triumph over equity, efficacy, and ambition.
When baseline presumptions misfire—misgauged trade inflows, phantom inflation, and over hyped growth—the fiscal compass skews, and the revenue vessel lists off course. FBR brass now mutter that their optimism over imports and price spirals proved delusional, explaining away the yawning gap. But such arithmetic myopia camouflages a deeper malaise.
At the bedrock sits a tax base as skinny as a reed. Salaried employees and incorporated firms, already sagging under an elephantine levy, still poured a formidable Rs5.8 trillion into the treasury last year. Low and middle income households likewise feel the squeeze. By contrast, heftier, more lucrative realms—retail emporia, sprawling farms, speculative real estate fiefdoms—linger on the periphery or luxuriate entirely outside the net. Political courage to correct this disequilibrium remains a mirage.
Thus, Pakistan now mimics Nordic tax rates while offering none of the Scandinavian welfare consolations. Ever steeper tariffs and shock and awe surcharges have turned the FBR into a ravenous predator, yet public services, social insurance, and institutional transparency remain skeletal.
Blueprints for widening the base—dragging the bazaar economy into daylight, or imposing a credible agricultural levy—have largely gathered dust. The token agriculture tax now unveiled is less an act of statesmanship than an IMF mandated rite. Squeeze the same oranges long enough and you yield only rind; beyond a threshold, punitive rates simply fertilise evasion.
Even the last chairman, Amjad Zubair Tiwana, forecast a ceiling of Rs11.8 trillion—an admonition that proved uncannily precise. Evidently, the command deck recognises its own speed limits, yet opts for heavier boots instead of tuning the engine. New mini budgets, harsher penalties, expanded coercive muscle—these remain the reflexive salves.
Until political grit, administrative sinew, and genuine accountability converge to broaden the tax mosaic, Pakistan will cycle endlessly between over reach and under shoot, chasing ever receding targets across a landscape pocked with structural fault lines.
Unless Pakistan musters the political resolve, bureaucratic stamina, and institutional integrity to expand the tax base and distribute the fiscal load equitably, the FBR will remain trapped in a cycle of inflated ambitions and inevitable disappointments. Widening the net, enforcing fair taxation on untapped sectors, and shedding the overreliance on a shrinking pool of compliant payers is no longer a policy choice—it is a survival imperative. Until then, the state’s desperate measures will keep squeezing the same exhausted sources, chasing an illusion of fiscal stability while the foundation quietly erodes beneath it.