By Staff Reporter
ISLAMABAD: The tax authority collected 901 billion rupees in August, missing its target by 29 billion rupees and leaving the pace of revenue growth well short of the roughly 17% annual increase required to meet a target tied to the country’s International Monetary Fund loan program.
The shortfall left August collections roughly flat from the 900 billion rupees gathered a year earlier. For the first two months of the 2026-27 fiscal year, which began July 1, the Federal Board of Revenue raised 1.722 trillion rupees, edging past its 1.71 trillion-rupee target by 12 billion rupees — a gain of just 4% from the 1.656 trillion rupees collected over the same period last year. The near-target result masked a split within the numbers: income tax collection ran well behind schedule, while sales tax receipts, lifted by rising fuel prices, continued to outperform.
The stakes attached to that gap are unusually high this cycle. The government and the IMF have agreed on an annual collection target of 15.264 trillion rupees for the fiscal year, and the Fund has made progress toward that figure a condition for releasing the sixth tranche of Pakistan’s loan program — a tighter linkage than in previous agreements. Provincial governments have pledged more than 1 trillion rupees in grants to Islamabad for defense and water projects, contingent on the FBR hitting its full-year number, and the federal government has introduced its own revenue and enforcement measures projected to raise more than 1 trillion rupees as part of the current budget.
Income Tax Falls Short
Income tax, the largest single component of the FBR’s revenue base, collected 688 billion rupees in the first two months of the fiscal year, missing its target of 758 billion rupees by 70 billion rupees. That marked a 3% decline from the 710 billion rupees collected in the same period last year, one of the few categories to post an outright drop.
Customs duty collection also lagged, totaling 198 billion rupees against a target of 201 billion rupees, a shortfall of 3 billion rupees that left receipts essentially unchanged from the 198 billion rupees collected a year earlier.
Sales Tax and Fuel Levies Provide Cushion
Sales tax collection reached 718 billion rupees, exceeding its target of 633 billion rupees by 85 billion rupees and rising 14% from 632 billion rupees a year earlier. Tax officials attributed the gain largely to inflation, particularly in petroleum prices, which lifts sales tax revenue both directly and through knock-on price increases across other goods.
Nearly 70% of sales tax revenue, roughly 496 billion rupees, was generated at the import stage. A change introduced in this year’s budget requires sales tax on a range of items to be assessed at market prices rather than factory-gate prices, a shift officials said has curbed some evasion but disrupted the value-added tax chain.
Federal excise duty collection totaled 118 billion rupees, narrowly topping its 117 billion-rupee target and rising 2% from 115 billion rupees a year earlier.
Petroleum development levy receipts helped cushion the shortfall elsewhere, with the government charging as much as 120 rupees per liter on petrol — among the highest rates in the country’s history. Officials said the record levy receipts were driven primarily by that elevated rate rather than by consumption growth. Unlike general sales tax on petroleum products, which is shared with provinces under the National Finance Commission award, revenue from the petroleum levy accrues entirely to the federal government. Petroleum products currently carry no general sales tax.
Overall, more than 810 billion rupees, or 47% of total tax collected in the two-month period, came from the import stage, where officials said opportunities for evasion are comparatively limited.
The FBR issued 155 billion rupees in refunds and rebates during July and August, up 31 billion rupees from the 124 billion rupees issued in the same period last year.
Retailer Integration Advances, Service Providers Lag
The tax authority made progress integrating large retailers into its point-of-sale monitoring network, with the number of registered businesses climbing to more than 17,300 in the last fiscal year, a 31% increase. Most of the newly integrated retailers, however, came from traditional sectors such as textiles.
A separate effort to bring service providers into the FBR’s digital reporting system has stalled. A draft regulatory order issued in February 2026 has yet to take effect, leaving at least 14 categories of service providers unable to register, including restaurants, hotels, motels, guest houses, marriage halls, marquees, clubs, inter-city road travel operators, courier and cargo services, beauty parlors, clinics, medical diagnostic and pathological laboratories, and other health-related service providers. Those businesses are required to install and integrate electronic invoicing systems with the FBR’s central platform, but tax officials said that step cannot proceed until the pending regulatory order is finalized.
Separately, the FBR’s broader enforcement push has faced delays in restricting economic transactions by taxpayers who fail to meet compliance requirements, a measure officials attributed to both political sensitivities and the state-run Pakistan Revenue Automation Ltd.’s inability to build a system capable of enforcing the restriction.
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