The IMF has highlighted serious administrative weaknesses in Pakistan’s Federal Board of Revenue (FBR) after a major tax shortfall last fiscal year. Pakistan collected Rs1.2 trillion less than the federal budget target, the IMF report said. Structural and enforcement gaps were cited as key reasons for the shortfall.
According to the report, sales tax and import duties accounted for the largest portion of the revenue gap. Weak compliance and poor enforcement compounded the problem, while sluggish economic growth contributed Rs850 billion to the shortfall. Administrative inefficiencies accounted for another Rs380 billion, including delays in tax case disposal.
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Despite the gap, the IMF acknowledged that tax collection improved by 26% compared to the previous year. However, it stressed that strengthening administrative capacity and enforcement is critical to meet future targets. The Fund described reform of FBR processes as central to Pakistan’s ongoing economic agenda.
In response, FBR has ordered strict scrutiny of major exporters reporting sudden drops in taxable income. Field offices in Karachi, Lahore, and Islamabad are instructed to review 10–30 key exporters each. Legal action will follow in cases of underreporting without valid justification.
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The IMF has also proposed ending tax exemptions on locally manufactured electric and hybrid vehicles starting in 2026–27. These measures aim to broaden the tax base and ensure full compliance, potentially affecting Pakistan’s electric vehicle industry.