FBR falls Rs1.235 trillion short of annual tax target in FY25

• FBR had set out Rs12.97tr tax revenue target in FY25.
• Tax target was revised twice during last fiscal year.
• Was brought down to Rs12.332tr and then Rs11.9tr.
  

ISLAMABAD: With the Fiscal Year 2024-25 coming to an end, it has come to light that the Federal Bureau of Revenue (FBR) missed its tax collection target of Rs12.97 trillion by Rs1.235 trillion, collecting only Rs11.735 trillion.

As per a report published in The News, the tax collection target was revised downward twice — first in February-March 2025, from Rs12.97tr to Rs12.332tr, and then during the 2025-26 budget, when it was further reduced to Rs11.9tr.

Achieving next year’s tax collection target of Rs14.131tr for FY 2025-26, starting July 1, 2025 (today) will be challenging for the FBR, as it failed to meet the base collection of Rs11.9tr. This means the revenue authority will have to intensify efforts to reach the upcoming fiscal year’s goal.

Due to this shortfall, the government has limited options but to restrict expenditures to keep the fiscal deficit—particularly the primary balance — within the International Monetary Fund's (IMF) agreed limit for June 2025. Reduced interest payments, initially projected at Rs9.7tr for the outgoing fiscal year, were lowered to Rs8.9tr, resulting in savings of Rs0.8tr.

"The annual tax collection target was ambitiously set at Rs12.3tr, marking a substantial 32% increase compared to the Rs9.3tr collected during FY 2023-24," a FBR statement said.

It stated the target was formulated based on the assumption of an autonomous growth rate of 15 per cent in FY25.

"Given the subdued economic environment and lower than expected autonomous growth, the estimated tax collection for FY25 without any corrective measures would have been projected to Rs10.07tr," it added.

The tax collection body further said: "If the government had opted for fiscal policies that sustained higher inflation, it would have led to a corresponding increase in interest rates along with an increase in debt repayments. Such policies would have disproportionately burdened lower-income households, decreasing their purchasing power and deepening economic inequality. In contrast, by maintaining inflation at relatively low levels, the government has provided critical relief to vulnerable segments of the population, particularly those living near or below the poverty line, and safeguarded their real incomes and cost-of-living pressures."

It explained that in response to the challenge of lower collection due to macroeconomic pressures, the FBR undertook significant efforts to strengthen enforcement, improve administrative efficiency, and implement new policy measures. "These interventions successfully elevated the provisional total tax collection to Rs11.735tr, representing a 26% increase over the previous year," it added.

Provisionally, the total collection of Rs11.735tr consists of Rs5.784tr in income tax (28% growth from previous year), Rs3.9 trillion in sales tax (26% growth from previous year), Rs0.767tr in customs duty (16% growth from previous year), and Rs1.284tr in customs duty (27% growth from previous year).