FBR narrowly meets two-month tax target

FBR narrowly meets two-month tax target

The Federal Board of Revenue (FBR) collected Rs1.722 trillion in taxes during July and August, narrowly exceeding its two-month target of Rs1.71 trillion, but the modest growth has raised concerns about meeting the ambitious annual revenue goal.

According to provisional figures, FBR receipts increased by only Rs55 billion, or 3.3%, compared with the same period last year. The pace remains well below the 17.4% growth required to achieve the annual target of Rs15.263 trillion agreed with the International Monetary Fund (IMF).

The tax authority exceeded its two-month target by Rs12 billion, mainly because of stronger collections in July. However, it fell short of the August target by Rs29 billion. Against the monthly target of Rs930 billion, the FBR collected around Rs900 billion by Monday evening, according to senior tax officials.

The IMF has made revenue performance a key condition under the current programme, with progress towards the first-half tax target linked to approval of the sixth loan tranche.

The federal government has also introduced revenue and enforcement measures worth more than Rs1 trillion in the budget to support the FBR’s collection drive. Meanwhile, the provinces have agreed to provide more than Rs1 trillion in grants for federal defence and water-related projects, provided the FBR achieves its annual revenue target.

Income tax collection remained a major weak point during the first two months. The FBR collected more than Rs685 billion, falling Rs74 billion short of its target. The amount was also Rs29 billion lower than last year’s collection, representing a 4% decline.

Sales tax, however, performed strongly for the second consecutive month. The FBR collected Rs719 billion, exceeding its target by Rs85 billion and showing a 14% increase, or Rs86 billion, compared with the same period last year.

Around Rs496 billion, or 69% of total sales tax, came from imports. Recent changes in the tax law require authorities to calculate sales tax on market prices rather than factory-gate prices for several products. The measure aims to reduce tax evasion, although it has also affected the value-added tax chain.

Federal excise duty collection reached Rs118 billion, almost matching the target and standing Rs3 billion above last year’s figure. Customs duty generated Rs198 billion, slightly below the target and roughly equal to the previous year’s collection.

Overall, the FBR collected more than Rs810 billion, or 47% of total taxes, at the import stage, where officials consider the risk of evasion relatively low. The tax authority also issued Rs155 billion in refunds, around Rs31 billion more than last year.

The FBR continues to face challenges in implementing its enforcement measures. Tax officials, speaking on condition of anonymity, said political considerations and delays in developing an effective digital system have slowed plans to restrict economic transactions involving ineligible taxpayers.

The FBR also made progress in bringing large retailers into the tax system. Some 17,337 large retailers joined its Point-of-Sale (POS) network during fiscal year 2025-26, increasing the number of integrated businesses by 31% in one year.

However, the authority has yet to finalise income tax rules required to digitally integrate 14 service providers, highlighting continued gaps in the implementation of its broader tax enforcement strategy.