Islamabad, October 1, 2024 – In a mixed financial performance for the start of the fiscal year, the Federal Board of Revenue (FBR) managed to surpass its revenue collection target for September 2024, but fell short of the ambitious tax collection target for the first quarter (July-September) of the fiscal year 2024-25. This outcome highlights the ongoing challenges in tax mobilization, despite various revenue-generating measures introduced earlier this year.
According to official figures, the FBR collected net revenue of Rs 996 billion in September, exceeding the target of Rs 985 billion set for the month. This achievement signals that the revenue authority is capable of mobilizing substantial resources, at least in the short term. However, this success could not offset the revenue shortfall faced during the entire first quarter, where the FBR fell Rs 87 billion short of its Rs 2,539 billion target. The total collection for the quarter was Rs 2,452 billion, a gap that raises concerns about the country’s broader fiscal health and the government’s ability to meet its full-year objectives.
The revenue shortfall is notable, particularly in light of the extensive revenue measures introduced in the federal budget for 2024-25. These measures were expected to generate Rs 1,800 billion over the fiscal year, underscoring the FBR’s ongoing struggle to fully capitalize on the projected windfall.
The performance for the first quarter is troubling because it exacerbates pressure on the government to meet the annual tax collection target of Rs 12,915 billion for the current fiscal year. Given the magnitude of this target, the FBR may face even tougher hurdles in the upcoming quarters, requiring enhanced measures to bridge the gap between actual collections and expectations.
Additionally, the FBR has ramped up its efforts to broaden the tax base by increasing the number of registered taxpayers. The tax body received 3.6 million income tax returns for the tax year 2024, a notable jump from the 1.9 million returns filed during the same period last year. However, of these 3.6 million returns, 1.3 million came from nil-filers—individuals or entities that declared no taxable income. This growing trend of nil-filing, paired with the high number of non-filers, underscores a structural challenge in expanding the tax base.
In response, the FBR is reportedly preparing to introduce a set of enforcement measures targeting non-filers and nil-filers. Sources indicate that the government is expected to issue an Ordinance aimed at tightening compliance and bringing non-filers under the tax net. This could also include the abolition of the non-filer category altogether and the restructuring of non-registered business entities. The overarching goal is to incentivize compliance and boost revenues in the remaining three quarters of the fiscal year.
Prime Minister Shehbaz Sharif recently gave the green light to the FBR’s transformation plan, which includes these enforcement measures. If implemented effectively, these steps could help the government achieve its fiscal targets for the year, despite the current shortfall. The FBR’s advance tax collection drive, especially in sectors such as banking and the corporate sector, is also expected to play a crucial role in mitigating the shortfall.
However, the FBR’s performance in the first quarter does little to alleviate broader concerns about Pakistan’s ability to navigate its complex fiscal challenges. The shortfall from the initial two months of the fiscal year, where tax collection stood at Rs 1,456 billion—Rs 98 billion short of the Rs 1,554 billion target—underscores the difficulty of the task ahead.
As the fiscal year progresses, the FBR will need to ramp up its efforts to close these gaps and ensure that revenue collections align with projections. Without significant improvements, the government’s broader economic agenda may be jeopardized, threatening critical development projects and public services that depend heavily on robust revenue streams.
