Shift toward solar energy cited among major reasons behind lower tax collection
The Federal Board of Revenue (FBR) recorded a nearly 30% decline in withholding income tax collection through electricity bills from Karachi during the first 10 months of fiscal year 2025–26, according to official sources.
Sources within the FBR said withholding tax collection through electricity bills fell to Rs20.5 billion during July-April FY2025–26, compared with Rs29.40 billion collected in the corresponding period of the previous fiscal year.
The FBR collects withholding income tax from industrial, commercial and domestic electricity consumers through monthly utility bills under Section 235 of the Income Tax Ordinance, 2001.
Officials said the decline was mainly linked to lower electricity consumption during the period.
Tax authorities believe increasing adoption of alternative energy sources, particularly solar power systems, has reduced dependence on grid electricity supplied by K-Electric, which collects the withholding tax on behalf of the FBR.
Sources in the local tax office said a detailed scrutiny process has been initiated to identify the exact reasons behind the significant drop in tax collection.
The decline became more pronounced on a monthly basis, with withholding tax collection in April 2026 falling by 41% compared with the same month last year.
Analysts said the growing shift toward solar energy and energy efficiency measures is gradually affecting traditional electricity-based tax collection channels, creating new challenges for revenue authorities.
They added that declining industrial activity and higher electricity tariffs may also have contributed to lower power consumption and reduced withholding tax receipts.
