LAHORE: The International Monetary Fund (IMF) has expressed concern over Pakistan’s declining tax collections, urging the government to take additional measures to meet its annual revenue target of Rs15,264 billion.
According to Federal Board of Revenue (FBR) sources, tax collections fell short by Rs129 billion in October, while the cumulative shortfall from July to October reached Rs96 billion.
The lender has called for a broader tax base and improved revenue collection, warning that failure to meet targets could bring tougher conditions in the upcoming budget and future economic reviews.
The IMF has directed the government to bring sectors currently outside the tax net into the formal system, particularly retail, wholesale and agriculture.
The demand also covers professionals such as doctors, lawyers, engineers and chartered accountants, with the lender pressing for higher collections from all untaxed or undertaxed sectors.
The global financial institution has also stressed the need to improve General Sales Tax (GST) collection at both federal and provincial levels and increase Pakistan’s overall tax-to-GDP ratio.
Tax-to-GDP ratio target set at 15%
According to sources, the IMF considers the existing combined federal and provincial tax-to-GDP ratio of 11.1% insufficient.
It wants Pakistan to raise the ratio to at least 15%, making broader tax compliance and improved revenue mobilisation key priorities ahead of the next federal budget.
The lender has insisted that the annual tax collection target of Rs15,264 billion must be achieved, describing current revenue levels as inadequate.
Emergency taxes or spending cuts
FBR sources said the government has been warned that if the revenue shortfall widens, it may have to introduce emergency tax measures or reduce public expenditure.
This could leave the government with the option of imposing additional taxes, potentially placing a further financial burden on the public, if existing collection targets remain unmet.
Sources added that compliance with the conditions of Pakistan’s $7 billion IMF loan programme is mandatory. The Fund may also tighten revenue-related requirements for the next fiscal year, making tax collection and expansion of the tax base central issues in upcoming economic reviews.
