By Staff Reporter
ISLAMABAD: Pakistan’s tax authority collected 4.09 trillion rupees in the first four months of the fiscal year, 94.2 billion rupees short of its goal, leaving revenue growth at 6.6%, well below the roughly 17% needed to reach the 15.264 trillion rupees targeted for the year ending June 30, 2027.
The Federal Board of Revenue’s net collection for July to October compares with 3.834 trillion rupees a year earlier, an increase of 254 billion rupees, according to official data. The target for the period was 4.184 trillion rupees. Gross collection reached 4.355 trillion rupees, of which 265 billion rupees went out as refunds.
October was the weak spot. The board netted 1.003 trillion rupees in the month, 127.4 billion rupees below its 1.131 trillion rupee target, even though that was 5.6% more than the 950 billion rupees collected in October 2025. The size of the miss implies the board was about 33 billion rupees ahead of target through September. Provisional figures published by the Express Tribune on Oct. 31 described it as the first shortfall of the fiscal year.
Domestic taxes accounted for 3.662 trillion rupees of the four-month total, with customs duties contributing 427 billion rupees. Direct taxes brought in 1.86 trillion rupees, including 1.667 trillion rupees of domestic income tax and 162 billion rupees withheld at the import stage. Sales tax raised 1.524 trillion rupees, split between 1 trillion rupees at the import stage and 523 billion rupees domestically. Federal excise duty yielded 277 billion rupees, of which 227 billion rupees was collected domestically.
In October, domestic taxes made up 888 billion rupees of the monthly total, income tax 371 billion rupees and customs duties 115 billion rupees. Sales tax at the import stage raised 251 billion rupees, with 135 billion rupees from domestic sales tax.
The shortfall repeats a pattern from last year. The board missed its target by 274 billion rupees over the same four months of fiscal 2026, and it failed to meet the downward-revised first-half target of 6.49 trillion rupees, missing it by 330 billion rupees.
The board has also struggled to widen the tax base. Its fixed-tax scheme for retailers drew only 1,750 participants, of whom just 220 were new filers, against an official estimate of 3.6 million potential non-filers in the sector. The board had set a 50 billion rupee collection target for the scheme. Some 7.6 million income tax returns had been received by the Oct. 31 deadline, which was extended twice. Officials have said they can fine non-filers and seal the premises of retailers who stay outside the tax net.
Separately, the board has expanded the use of automated systems, including artificial intelligence, to check individual income tax returns, notifying taxpayers of discrepancies before any legal or penal action begins.
The rules were notified on Wednesday in SRO 2098(I)/2026, which inserts a new Rule 38B into the Income Tax Rules, 2002. Titled “Procedure for electronic scrutiny and intimation of issues detected by the automated system,” the rule applies to returns furnished under sub-section (2A) of Section 120 of the Income Tax Ordinance, 2001, which the board’s Computerised Risk Management system will process.
The system will compare the data in a return with other information available to the tax authorities and flag potential factual or legal errors. Taxpayers will be told through an online advice or advance intimation on the IRIS portal, which may also be issued by the Inland Revenue officer with jurisdiction over the taxpayer. The notice must give at least seven days to explain, correct or otherwise resolve the discrepancy. If there is no response, the system will send a reminder allowing at least seven more days.
The system will pass records of the detected issues, the notices sent and any replies to the Inland Revenue officer, who will review the response, or the lack of one, and may take action under the Ordinance and its rules. Notices, responses and follow-up action will be logged on a dashboard. The board said the scrutiny, cross-matching and electronic communication will be carried out through a Change Request Form.
The board had initially tested the system on selected income tax and sales tax returns, then extended it to returns for tax year 2026 and to subsequent sales tax returns. It issued a parallel mechanism for sales tax returns under SRO 1655(I)/2026 on Sept. 25.
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