The International Monetary Fund (IMF) has raised concerns over a major shortfall in Pakistan’s upcoming tax target. Pakistan plans to collect Rs14.3 trillion in taxes in the 2025-26 fiscal year. However, the IMF believes this target could fall short by over Rs1 trillion without strong new measures. The government must now either introduce more taxes or boost enforcement to meet the target.
Pakistan had earlier discussed raising Rs560 billion through new taxes. But the IMF doubts this will be enough. Last year, even after adding Rs1.3 trillion in new taxes, Pakistan missed its tax goal. The IMF expects that without major policy changes, tax collection may reach only Rs13.3 trillion. This could put the country off-track from its budget goals.
To meet IMF targets, Pakistan needs a budget surplus of 1.6% of GDP—about Rs2 trillion. The government hopes stronger enforcement will bring in Rs600 billion in taxes. However, similar efforts failed this year. For example, it had promised Rs150 billion from court case recoveries, but has collected only Rs34 billion so far. The IMF thinks enforcement next year may yield only Rs400 billion.
To close the gap, the government is considering steps like digital tracking of supply chains and cracking down on smuggling. The Federal Board of Revenue (FBR) is also setting up 37 new anti-smuggling checkpoints. It has also asked the World Bank for help in evaluating tax plans. Despite these efforts, some FBR officials believe the budget target is unrealistic and depends on a risky 40% rise in tax collection.
At the same time, the government is struggling to tax retailers effectively. The “Tajir Dost” scheme has failed to deliver results. Officials may now focus on wholesalers and distributors instead. With the IMF watching closely, Pakistan faces tough choices ahead to meet its revenue goals and avoid another economic setback.