Pakistan’s tax collection rises to Rs9.31 trillion but tax-to-GDP ratio declines
ISLAMABAD – The tax-to-GDP ratio based on revenue collection by the Federal Board of Revenue (FBR) declined during the first nine months of fiscal year 2025-26 despite a 10% increase in overall tax collection.
According to data released by the finance ministry, the FBR tax-to-GDP ratio slipped to 7.19% in 9MFY26 compared to 7.62% recorded during the corresponding period of the previous fiscal year.
FBR collects Rs9.31 trillion in 9MFY26
The FBR collected Rs9.31 trillion during July-March FY26, compared to Rs8.45 trillion collected during the same period of FY25.
The figures reflect an increase of around 10% in tax revenues on a year-on-year basis.
However, the decline in the tax-to-GDP ratio indicates that economic expansion outpaced the growth in tax collection during the period under review.
GDP expansion lowers tax ratio
According to the official figures, Pakistan’s GDP size was estimated at Rs129.57 trillion in 9MFY26 compared to Rs114.69 trillion in 9MFY25.
Although tax revenues increased significantly, the larger expansion in GDP resulted in a lower ratio of tax collection relative to the size of the economy.
Economists often view the tax-to-GDP ratio as a key indicator of a country’s fiscal capacity and efficiency in revenue mobilization.
Direct taxes record strong growth
The FBR’s collection of direct taxes increased to Rs4.64 trillion during the first nine months of FY26 compared to Rs4.13 trillion in the same period of the previous fiscal year.
The increase reflects higher income tax collection and improved enforcement measures implemented by tax authorities.
Indirect tax collection also rises
Meanwhile, indirect tax collection rose to Rs4.67 trillion in 9MFY26 compared to Rs4.32 trillion recorded a year earlier.
Indirect taxes include sales tax, customs duties and federal excise duties, which continue to contribute significantly to Pakistan’s overall revenue structure.
Challenges remain for tax reforms
Despite the growth in overall revenue collection, the decline in the tax-to-GDP ratio highlights ongoing structural challenges in Pakistan’s taxation system, including narrow tax base, undocumented economic activity and limited compliance levels.
The government and international financial institutions, including the International Monetary Fund (IMF), have repeatedly emphasized the need for broad-based tax reforms to improve revenue generation and strengthen fiscal sustainability.
Analysts say improving the tax-to-GDP ratio remains critical for reducing Pakistan’s reliance on borrowing and supporting long-term macroeconomic stability.