Pakistan’s Fiscal Revenue Nearly Doubles, but Structural Tax Issues Remain Unaddressed
Islamabad – Pakistan’s total fiscal revenue has almost doubled in the last two years, rising from Rs. 9.6 trillion to nearly Rs. 18 trillion, according to the latest figures released by the International Monetary Fund (IMF). The Finance Ministry credits this increase to enhanced tax collection efforts, the introduction of new levies, and consistent central bank support each fiscal year. However, this apparent growth conceals deeper, unresolved structural challenges within the country’s tax framework.
An Islamabad-based investment banker, speaking to ProPakistani, remarked, “This increase is largely superficial, driven by successive hikes in existing tax rates, mostly pushed through annual budgets every June. The tax base itself has remained stagnant throughout this period.”
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Concerns have been raised about the tax base remaining largely unchanged over the past 24 months, despite a significant rise in tax rates. Social media commentators have described this trend not as genuine economic progress but as a burden shift onto taxpayers. “Electricity bills have doubled, resulting in higher taxes. Income taxes have also doubled, yet these apply only to sectors already on the tax register. The base hasn’t expanded at all,” an expert shared recently.
While the IMF has acknowledged Pakistan’s fiscal growth, this endorsement has prompted widespread questions. “It is puzzling why the IMF does not insist on comprehensive reforms,” the banker added.
He further criticized the lack of implementation of essential measures such as the full roll-out of track-and-trace systems and mandatory certification of corporate accounts by CEOs and CFOs under the Federal Board of Revenue (FBR). “The FBR made attempts but was forced to backtrack, leaving off-the-books transactions largely unchecked,” he explained.
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According to Topline Securities, the government may consider increasing the exemption limit on salaries or reducing tax rates by 2.5% across all salary brackets. Additionally, inflation-adjusted minimum wages and reductions in super tax could be introduced, but these changes remain contingent on IMF approval.
The government is also planning to introduce new taxes estimated at Rs. 150 billion on biscuits, chips, and other packaged foods; Rs. 600 billion on online content creators; a Rs. 5 per liter hike in petroleum levies on petrol and diesel expected to generate an additional Rs. 80 billion; and a more stringent tax regime targeting retailers, expected to raise Rs. 295 billion. These measures underscore a persistent reliance on increasing taxes without meaningful reform.
Such surface-level gains may jeopardize the credibility of future FBR reforms. Many observers argue that FBR’s improved performance is primarily a result of taxing already documented sectors more heavily, rather than broadening the tax net to include untaxed sectors. Despite the strong headline revenue figures, the FY26 budget may anticipate slower tax growth to alleviate economic pressures. However, without substantial structural reforms and IMF cooperation, the coming fiscal year could prove particularly challenging for salaried individuals. Stay tuned with Bloom Pakistan
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