The International Monetary Fund (IMF) has laid out its projections and strategy concerning Pakistan’s tax revenue for the fiscal year 2024-25, anticipating a total tax collection of 12.6 percent of the Gross Domestic Product (GDP). This projection is slightly higher than the original target of 12.3 percent and is based on expected recoveries from litigation and enhanced enforcement measures.
According to the IMF’s report on the “First review under the Extended Fund Facility (EFF) arrangement,” the Federal Board of Revenue (FBR) collection is projected to be 10.7 percent of GDP for the outgoing fiscal year (2024-25), a marginal increase from the initial target of 10.6 percent.
Breakdown of Tax Contributions
The report provides a breakdown of projected tax contributions to the GDP for 2024-25: direct taxes are estimated at 4.8 percent, Federal Excise Duty (FED) at 0.9 percent, sales tax at 3.7 percent, and customs duty at 1.3 percent. Non-tax revenue is projected to reach 3.3 percent of GDP in 2024-25, up from the original target of 3 percent.
Focus on Expanding Tax Base and Compliance
The IMF noted that while the Tajir Dost scheme has underperformed, efforts to increase withholding taxes on unregistered retailers have shown positive results, leading to a significant year-on-year increase in tax filers among large retailers, wholesalers, and traders. To further monitor progress in bringing small traders into the tax net, a new indicative target on income tax revenue from this group has been introduced.
Efforts to improve compliance also include a proposed bill to eliminate the “non-filer” category, which would restrict non-filers from engaging in major economic transactions if approved by Parliament.
Provincial Agricultural Income Tax and Litigation
The report mentioned that while the structural benchmark on provincial Agricultural Income Tax (AIT) legislation was initially missed, it was subsequently passed in February 2025. The new tax regimes are effective from January 1, 2025, with tax liability for the latter half of the fiscal year to be collected in September 2025. Provinces, in collaboration with the World Bank and IMF, are developing plans for effective implementation and compliance of this new framework by end-June 2025.
Resolving outstanding litigation cases is another key focus, with approximately Rs 367 billion out of a total of Rs 770 billion in dispute expected to be recovered. These cases are pending before various courts, including the Supreme Court, High Courts, and the Appellate Tribunal Inland Revenue. Resolving these cases is expected to clarify the legal basis for federal taxation and reduce future litigation. The government has assured the IMF that efforts are underway to settle most of these cases by April and May 2025.
Strengthening Tax Administration
The IMF report highlighted ongoing measures to strengthen tax administration and reduce the compliance gap. These include focusing on Compliance Risk Management (CRM), digital value chain monitoring, detecting irregularities in sales tax returns, closer monitoring of irregular import patterns, and strengthened faceless customs assessments. CRM systems are now operational in major tax offices and are being expanded to incorporate third-party information for automated systems.
The FBR plans to identify high-risk taxpayers in sectors like retail, real estate, and corporate, increase the number of auditors for better enforcement, and continue targeted notification strategies. Expanding retailer participation in the integrated Point-of-Sale (POS) system and reinforcing anti-smuggling initiatives, particularly in north-western regions, are also part of the strategy to enhance revenue mobilization.
