FBR’s US$46 billion collection claim! 

The Chairman of the Federal Board of Revenue (FBR) the other day claimed and celebrated the collection of nearly US$46 billion in taxes, presenting it as evidence of an unprecedented fiscal achievement. Such claims may sound impressive in TV talk shows, press conferences and official presentations, but serious evaluation of tax administration requires looking beyond nominal figures and examining what lies beneath them.

Ironically, while the FBR leadership was congratulating itself, the World Bank downgraded its US$400 million Pakistan Raises Revenue (PRR) Project from “Satisfactory” to “Moderately Satisfactory” because of poor progress in achieving its core objectives. 

The World Bank report is a sobering indictment of Pakistan’s tax administration. The original objective of raising the tax-to-GDP ratio to 17 percent had to be abandoned. After years of technical assistance, loans, consultants, digitalisation projects and reform programmes, the benchmark itself was lowered to 10 percent of GDP. Even then, progress remained unsatisfactory. 

The World Bank noted that only 7 million out of 16.2 million registered taxpayers filed returns, reflecting a compliance rate of merely 43 percent. It also pointed out that key indicators relating to taxpayer facilitation and customs performance remain unverified or unavailable.

The downgrade demolishes the narrative that record collections necessarily reflect institutional success. If success is measured merely by extracting larger sums from an already documented segment of society through withholding taxes, advance taxes, blocked refunds and inflation-induced nominal growth, then any administration can manufacture impressive numbers. 

The real question is different: has Pakistan broadened its tax base, reduced informality, simplified taxation and increased voluntary compliance? The answer remains a resounding no.

The celebrated collection of Rs. 11.744 trillion in fiscal year 2024-25 itself requires careful scrutiny. FBR’s annual figures do not reveal the full extent of refunds delayed, withheld or disputed. Exporters and other taxpayers have repeatedly complained that refund payments are deferred to improve year-end collection figures. Various business associations estimate that pending refunds and rebate claims under all heads of taxes have crossed Rs 1.5 trillion. If legitimate refunds are not released on time, gross collections become a misleading measure of performance. Even the International Monetary Fund (IMF) has not ascertained such refunds claim.

Likewise, billions of rupees are collected through advance taxation mechanisms that represent future tax liabilities rather than current tax revenues. 

The proliferation of withholding taxes has transformed Pakistan into a withholding-tax state rather than a genuine income-tax jurisdiction. According to official figures, nearly 60 percent of FBR revenues now originate from withholding and presumptive tax regimes. The World Bank itself acknowledged that the authorities could not reduce withholding tax lines because of excessive dependence on them for revenue generation. In economic terms, this is not tax administration; it is tax harvesting.

A tax system should encourage documentation, investment and growth. Pakistan’s system increasingly punishes these very objectives. The documented sector, salaried individuals, banks, corporate entities, exporters and registered businesses bear a disproportionate burden while large segments of retail trade, real estate speculation, wholesale commerce and informal economic activity remain lightly taxed or entirely outside the net.

The FBR leadership celebrates the conversion of rupees into dollars to create the impression of global relevance. Yet international comparison exposes the hollowness of these claims. Consider Finland. With a population of less than six million people and a GDP of approximately €374 billion, Finland collected roughly €84 billion in taxes during 2025. Pakistan, with a population exceeding 250 million and immense untapped economic potential, celebrates tax collections equivalent to about US$46 billion while maintaining one of the lowest tax-to-GDP ratios among comparable economies.

The comparison is revealing. Finland does not achieve high revenue through thousands of withholding tax provisions, arbitrary notices, repeated audits, blocked refunds and coercive enforcement. It achieves revenue through broad-based taxation, high voluntary compliance, taxpayer trust, institutional credibility and an efficient welfare state.

Pakistan achieves the opposite: low compliance, high coercion, widespread litigation and perpetual distrust between taxpayers and tax collectors. Even more troubling is the failure of FBR’s celebrated reform programmes (sic). For nearly two decades, successive governments have borrowed billions of dollars from the World Bank, IMF, Asian Development Bank and other development partners to modernise tax administration. Every few years a new reform programme is launched with grand promises of digitisation, automation, risk-based audits, track-and-trace systems, data analytics and taxpayer facilitation. Yet the results remain disappointing.

The World Bank’s latest assessment effectively confirms what taxpayers have long argued: despite expensive reform projects, the fundamental weaknesses remain intact. Taxpayer compliance remains low. The tax base remains distorted, narrow and punctured. Documentation remains incomplete. Customs facilitation remains questionable. Revenue targets continue to be achieved primarily through rate increases, inflation and extraction from existing taxpayers rather than through structural reform. 

The claim of collecting US$46 billion also ignores the broader economic context. When nominal collections rise because inflation raises prices, wages and transaction values, part of the increase merely reflects monetary depreciation. Similarly, when businesses borrow to pay advance taxes or delay investment to meet tax demands, collections may increase while economic activity weakens. A tax administration cannot be judged solely by how much it collects. It must also be judged by the economic cost of collection.

The real performance indicator should be revenue productivity, voluntary compliance, taxpayer satisfaction, reduction in litigation, expansion of the tax base and contribution to economic growth. On these measures, the picture is far less flattering.

The World Bank downgrade is more than a technical assessment. It is a reminder that impressive-looking collection figures can conceal institutional failure. Pakistan does not suffer from a shortage of taxes. It suffers from a shortage of tax policy rationality. It does not suffer from a lack of enforcement powers. It suffers from a lack of trust and legitimacy. Until tax reform focuses on broadening the base, reducing exemptions, simplifying laws, integrating the informal economy, eliminating harassment and fostering voluntary compliance, annual collection records will remain little more than statistical trophies.

The real achievement will not be collecting US$46 billion from an overtaxed minority. The real achievement will be creating a system capable of generating twice that amount through prosperity, growth and genuine documentation. That day remains distant. The World Bank’s downgrade is a timely reminder that official self-congratulation cannot substitute for measurable reform.

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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.