The Federal Board of Revenue (FBR) has deliberately slowed down the disbursement of tax refunds as part of its strategy to enhance revenue collection for the fiscal year 2024-25.
This move aims to ensure the FBR meets its ambitious tax collection targets and strengthens the overall fiscal position of the country.
Sources within a tax office in Karachi revealed that the FBR, facing significant tax collection challenges, has directed its regional offices to slow the processing of refunds in both sales tax and income tax categories. This delay in refunds is seen as a temporary measure to maintain higher revenue figures and demonstrate improved collection performance.
The slowdown in tax refunds has already impacted businesses and taxpayers awaiting their due payments. According to official data from a tax office, the total disbursement of refunds declined by 11% during the period from July to February 2024-25 compared to the same period in the previous fiscal year. Many taxpayers, particularly exporters and industries relying on timely refunds for cash flow, have raised concerns over the delay.
The FBR has taken this step to improve its revenue figures as it seeks to satisfy the International Monetary Fund (IMF) regarding its tax collection performance. However, given the substantial tax collection targets, Pakistani authorities have requested the IMF to revise the targets downward for the fiscal year 2024-25, recognizing the difficulties in achieving the initially set goals.
Sources indicate that the IMF has agreed to lower the FBR’s tax collection target from Rs 12,970 billion to a revised range of Rs 12,332 to Rs 12,334 billion for the current fiscal year. This adjustment reflects the challenges posed by economic conditions and tax collection constraints.
For March 2025, the FBR initially had a tax collection target of Rs 1,220 billion. However, considering the increased public holidays due to Eid ul-Fitr, the FBR requested a reduction of Rs 70 billion for the month. The IMF has granted this request but has instructed the FBR to enhance tax collections in April and May 2025 to meet the revised target of Rs 12,334 billion by June 2025.
Despite these measures, businesses continue to push for the timely release of their refunds, emphasizing the need for a balance between tax collection efforts and financial relief for taxpayers.