Islamabad, February 7, 2026 – The Federal Board of Revenue (FBR) has recorded a decline in Pakistan’s tax-to-GDP ratio to 4.75% during the first half (July–December) of fiscal year 2025-26, according to official data released by the Ministry of Finance.
The latest figures show a marginal drop from 4.90% recorded in the same period of the previous fiscal year, despite a notable increase in overall tax collection. During the first half of FY26, the FBR collected Rs6.16 trillion, compared to Rs5.625 trillion in the corresponding period of FY25, reflecting a 9.55% year-on-year growth. However, the expansion in GDP, projected at Rs129.567 trillion, outpaced revenue growth, leading to the lower tax-to-GDP ratio. In 1HFY25, GDP was estimated at Rs114.692 trillion.
A closer look at the revenue mix reveals steady growth in both direct and indirect taxes. Direct tax collection rose by 8.91% to Rs3.03 trillion, up from Rs2.782 trillion in the same period last year. Meanwhile, indirect taxes increased by 10%, reaching Rs3.13 trillion compared to Rs2.843 trillion.
Among indirect taxes, performance remained mixed. Customs duty collection grew by 7.46%, sales tax registered a 10% increase, while federal excise duty (FED) showed the strongest growth of 15.48%, indicating improved compliance and consumption recovery in selected sectors.
Despite the decline in the first-half ratio, tax authorities remain optimistic about a strong rebound in the latter half of the fiscal year. In FY25, the overall tax-to-GDP ratio improved significantly to 10.24%, mainly due to robust revenue performance in the second half.
Officials believe a similar trend could emerge in FY26, supported by enhanced enforcement, digitalization measures, and ongoing tax reforms. The FBR is expecting a notable acceleration in revenue collection during the remaining months, which could lift the overall tax-to-GDP ratio and strengthen fiscal stability.
Economists, however, stress that sustained improvements will require broadening the tax base, reducing reliance on indirect taxation, and improving documentation of the economy. Achieving a higher and more stable tax-to-GDP ratio is seen as critical for reducing fiscal deficits, managing public debt, and ensuring long-term economic sustainability.