Business Recorder
EDITORIAL: Federal Board of Revenue (FBR) is once again behind its tax collection target. It has missed the 9MFY26 target by a wide margin of Rs610 billion, with the shortfall widening further in March due to trade disruption and the economic slowdown caused by the war in the Middle East. The gap is likely to widen further, and the full-year target is expected to be missed by a huge margin. The situation was saved from becoming more complicated, as the government has finally decided to pass the impact of higher international oil prices onto the consumers in order to stem the growth of petroleum differential claim (PDC). This means the subsidy will not increase further and compound the challenge of achieving the full-year primary fiscal balance target of Rs2 trillion (1.6 percent of GDP). At the same time, the gap in FBR tax collection is likely to widen, as sales tax collection at the import stage is lower due to trade disruption and its impact on the value chain, especially in the gas sector. Yet, the IMF is seeking a target of Rs15.6 trillion for next year, along with possible new measures to extract Rs400 billion. With this year’s revised target of Rs13.98 trillion set to be missed by a significant margin, next year’s target of Rs15.6 trillion, or 11.3 percent of GDP, would be impossible to achieve. The Fund is not showing flexibility in lowering next year’s target. The logical conclusion is that the government’s plan to reduce the super tax in a phased manner, along with providing some relief in the excessively high tax on the salaried class, may take a back seat. Another IMF condition is that board approval of the recently finalised third review, and the release of the USD 1.2 billion tranche, are contingent upon receiving the remaining Rs322 billion from court cases that have already been decided in favour of the FBR. The FBR has already collected close to Rs300 billion. Most of these taxes are in lieu of the super tax imposed on big companies and high-net-worth individuals. At one point, the government says it wants to reduce the tax burden on the formal sector while, on the other hand, the same sector is being squeezed further. A higher tax burden is one of the key reasons why MNCs are exiting Pakistan, and why the overall formal footprint, especially in the manufacturing sector, is shrinking. This is resulting in layoffs and a growing reliance on imports, which goes against the spirit of the government’s stated policy of pursuing export-led growth. The irony of the matter is that the state is not ready to touch the holy cows, and there is no real resolve to expand the tax base. The income tax collection target from farm income by the provinces is ridiculously low. Plus, there is no meaningful collection from the livestock sector, where there is confusion over jurisdiction. Traders, wholesalers and retailers are also not paying their due share. The burden falls disproportionately on the urban formal sector. And despite that, the IMF’s targets are still being missed. The situation will become even worse if the war continues, and sooner or later the government may have to resort to declaring a financial emergency. To obviate the resort to such extreme yet constitutionally valid measure, the time has come to extract the due from the so-called holy cows and compel them to pay their due that they have avoided for far too long. Copyright Business Recorder, 2026
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