The International Monetary Fund (IMF) has projected that Pakistan’s tax-to-GDP ratio will remain largely stagnant over the next five years, despite a notable increase recorded in the previous fiscal year. While federal tax collections improved due to additional revenue measures, the Fund expects only marginal gains going forward, mainly driven by provincial taxes.
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According to IMF estimates, Federal Board of Revenue receipts increased from 8.9 per cent of GDP in FY24 to 10.3 per cent in FY25, still falling short of the programme target. For the current fiscal year, FBR revenue is projected to rise to 11.1 per cent of GDP, a level the Fund expects to remain unchanged until FY30.
In absolute terms, FBR revenue rose from Rs9.3 trillion in FY24 to Rs11.74tr in FY25, but with a significant shortfall against projections. For the ongoing year, collections are estimated at Rs13.98tr, implying a gap of Rs328bn under current assumptions.
The IMF attributed much of the FY25 revenue shortfall to lower-than-expected inflation, slower GDP growth, and unresolved administrative and enforcement challenges. Delays in settling tax court cases also hampered recovery of disputed amounts, contributing to weaker collections.
Overall revenues, including non-tax receipts, increased sharply to 15.9 per cent of GDP in FY25, mainly due to higher petroleum levy receipts and profits from the State Bank. The petroleum levy is expected to remain a key revenue source, contributing around 1.1 to 1.2 per cent of GDP over the medium term.
While federal tax ratios are projected to remain flat, the IMF expects provincial taxes to improve with the implementation of agricultural income tax and expanded sales tax on services. Provincial tax collection is forecast to rise from 0.9 per cent of GDP to 1.6 per cent by FY28 before stabilising.
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The Fund noted that sustained improvements in the tax-to-GDP ratio would require reforms focused on tax simplification, base broadening, and better coordination between federal and provincial authorities to support long-term economic growth.