ISLAMABAD: The FBR revenue shortfall FY25 has reached nearly Rs1.008 trillion during the first 11 months of the fiscal year, mainly due to slowing economic growth and a decline in imports, which weakened domestic sales tax collection.
Sales Tax and Imports Drive Major Portion of FBR Revenue Shortfall FY25
Between July and May, FBR collected Rs10.233 trillion, falling behind the budgeted target of Rs11.241 trillion. Despite the shortfall, the collection was 26% higher than the Rs8.11 trillion collected during the same period last year.
In May alone, FBR collected Rs932 billion, missing the monthly target of Rs1.11 trillion by Rs178 billion. However, this amount marked a 22% increase from May last year’s Rs762 billion, based on provisional data released Saturday.
The revenue gap highlights ongoing issues with tax compliance, particularly in domestic sales tax, even after removing exemptions on goods like stationery and infant formula. The persistent underperformance suggests existing inefficiencies in the tax collection process.
A major factor was low import activity, which continues to hurt sales tax generation amid a broader economic slowdown. To address these gaps, FBR has rolled out digital reforms and plans to announce additional measures in the upcoming budget to promote a cashless economy.
FBR cited two primary reasons for May’s shortfall
An eight-day farmers’ strike in Sindh, which disrupted major supply chains, and decreased port clearances due to recent tensions with India. The exact impact of these events on revenue remains unquantified.
In response to the fiscal strain, the IMF revised FBR’s FY25 target downward from Rs12.913 trillion to Rs12.33 trillion, a reduction of Rs580 billion. Meanwhile, independent economists predict that actual revenue collection will hover around Rs12 trillion.
The shortfall has been largely driven by weaker import tax revenues, stagnant manufacturing growth, and lower-than-expected inflation, which recently hit a record low of 0.3%. Although the previous budget introduced Rs1.761 trillion in new tax measures, actual revenue collection still missed the mark.
During July–May, FBR issued Rs458 billion in refunds and rebates, up slightly from Rs453 billion last year. However, May’s refunds dropped to Rs29 billion compared to Rs31 billion a year earlier.
Income tax collection reached Rs4.9 trillion in 11MFY25, surpassing the Rs4.586 trillion target by Rs314 billion, and grew 27% from last year’s Rs3.852 trillion. Sales tax collection, however, totaled Rs3.503 trillion—Rs895 billion below the target of Rs4.398 trillion—despite a 27% increase from last year’s Rs2.765 trillion.
Customs duties also missed their target by Rs263 billion, collecting Rs1.157 trillion against the Rs1.420 trillion target. Nevertheless, customs revenue rose 17% from last year’s Rs991 billion.
Federal Excise Duty (FED) collection totaled Rs673 billion, falling short by Rs165 billion compared to the Rs838 billion target, though it still grew 34% from last year’s Rs503 billion.
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