As Fiscal Year 2024-25 draws to a close, the Federal Board of Revenue (FBR) has missed its ambitious tax collection target of Rs12.97 trillion by a significant margin, managing to collect only Rs11.735 trillion. This shortfall of Rs1.235 trillion comes despite a notable 26% growth compared to the previous fiscal year. According to The News, the target had already been revised downward twice during the year—first in February-March 2025 to Rs12.332 trillion, and then again during the FY2025-26 budget discussions, when it was further reduced to Rs11.9 trillion. However, the FBR failed to even meet the lowered benchmark, signaling a steep challenge ahead as it prepares to collect Rs14.131 trillion in the new fiscal year beginning today, July 1, 2025.
This shortfall leaves the government with limited choices, compelling it to tightly control expenditures in order to stay within the fiscal deficit limits, particularly those agreed upon with the International Monetary Fund (IMF) for June 2025. A modest financial cushion was achieved through reduced interest payments, which were originally projected at Rs9.7 trillion but ended up being Rs8.9 trillion, saving the government Rs800 billion.
In a statement, the FBR acknowledged that the original target of Rs12.3 trillion represented a bold 32% increase over the Rs9.3 trillion collected during FY2023-24. The projection was based on the expectation of a 15% autonomous growth rate for FY2024-25—a figure that ultimately proved unrealistic amid a subdued economic climate. The FBR further noted that had no corrective measures been taken, the year’s tax collection could have fallen as low as Rs10.07 trillion.
The tax authority explained that while the government could have adopted policies to drive up inflation and thereby boost nominal tax receipts, such an approach would have resulted in higher interest rates and debt repayments. This would have placed a disproportionate burden on low-income households by eroding their purchasing power and increasing economic inequality. Instead, by maintaining inflation at relatively low levels, the government was able to provide crucial relief to vulnerable populations, safeguarding real incomes and easing cost-of-living pressures for those living at or below the poverty line.
In response to the economic and fiscal challenges, the FBR implemented a range of measures aimed at improving enforcement, enhancing administrative efficiency, and introducing new policy initiatives. These actions, the agency claims, helped elevate the provisional tax collection to Rs11.735 trillion—representing a strong 26% year-on-year increase. Within this total, income tax contributed Rs5.784 trillion with a 28% growth rate, sales tax amounted to Rs3.9 trillion with 26% growth, customs duty brought in Rs0.767 trillion with a 16% rise, and federal excise duty added Rs1.284 trillion, marking a 27% increase from the previous year.
Despite these gains, the failure to meet even the revised target underlines the difficult path that lies ahead. With a significantly higher goal of Rs14.131 trillion set for FY2025-26 and macroeconomic pressures still lingering, the FBR faces a formidable task. Navigating this fiscal terrain will require not just stronger collection mechanisms, but also sustained economic stability and policy discipline.
