ISLAMABAD: Direct taxes are expected to contribute around 50 percent of Pakistan’s total tax collection during fiscal year 2026-27, according to the latest revenue forecasting report issued by the Federal Board of Revenue (FBR).
The FBR projected that direct taxes will retain their position as the largest source of tax revenue in FY2026-27, highlighting a continued shift toward a tax system that relies more on income-based taxation than indirect levies.
According to the report, the increasing share of direct taxes reflects efforts to build a fairer and more balanced taxation framework by reducing reliance on indirect taxes collected through consumption and trade.
The FBR noted that income-based taxation is generally regarded as more progressive because it is linked to taxpayers’ earnings rather than spending. A stronger contribution from direct taxes also helps protect government revenues from fluctuations in domestic consumption and international trade.
The revenue forecasting report further stated that direct taxes are expected to provide a more stable source of revenue over the medium term as Pakistan continues implementing reforms aimed at expanding documentation, digitizing tax administration, and improving taxpayer compliance.
The FBR said the projected growth in direct tax receipts, combined with the changing composition of overall tax collection, indicates not only higher revenue generation but also improvements in the quality of revenue mobilization. The shift is expected to strengthen fiscal sustainability and support the government’s objective of creating a more resilient, efficient, and equitable tax system.
