FBR Faces Rs 450 Billion Shortfall in First Eight Months of FY26-25

Islamabad: The federal government is confronting a substantial shortfall of Rs 450 billion in tax collection during the first eight months (July–February) of the current fiscal year 26-2025, raising the likelihood of a second downward revision of revenue targets.

Sources report that the Federal Board of Revenue (FBR) collected approximately Rs 8.1 trillion in this period, falling Rs 450 billion short of the revised target and Rs 670 billion below the original target. Initially, the FBR had set an annual revenue target of Rs 14.13 trillion, which was later reduced by Rs 216 billion following negotiations with the International Monetary Fund (IMF). The FBR has now proposed a further significant reduction, with discussions with the IMF expected next week.

To offset the revenue gap, the government has increased petroleum levy rates and implemented significant cuts in development spending to achieve the budget surplus agreed with the IMF. However, experts argue that these measures create an artificial sense of fiscal stability.

Sources indicate that the IMF has not deemed it feasible to immediately broaden the tax net. During meetings with business representatives, concerns were raised about sectors benefiting from tax evasion, though IMF Mission Chief Ms. Eva Petrova highlighted challenges in expanding the tax base on an immediate basis.

FBR collections include Rs 125 billion from the super tax; without a favorable court decision, total collections would have been less than Rs 8 trillion. However, sources suggest that the net fiscal impact of the super tax ruling will be lower than FBR expectations.

Breaking down the figures: income tax collections stood at Rs 3.94 trillion against a revised target of Rs 4.1 trillion, a shortfall of Rs 160 billion, though 15% higher than last year. Sales tax collection was Rs 2.8 trillion, Rs 322 billion below the target. Federal excise duty collections totaled Rs 531 billion, exceeding the target by Rs 6 billion, while customs duty amounted to Rs 850 billion, Rs 49 billion short of the target.