Tax shortfall

Listen to article

The government's tax collection strategy has hit a shortfall — again. Despite imposing record taxes, withdrawing advances, freezing accounts and squeezing the salaried class beyond reason, the FBR missed its target by a staggering Rs1.03 trillion with just a month left in the fiscal year. To be clear: the target of Rs12.334 trillion was overly ambitious from the outset. It assumed compliance without reform, growth without relief, and revenue without restructuring.

This shortfall has come at a heavy cost to the public. The salaried class alone paid Rs437 billion in income taxes till April — a 52% increase over last year — while electricity bills and essential goods were taxed like luxuries. Meanwhile, the FBR aggressively pursued stopgap measures: illegally withdrawing funds from bank accounts, holding back refunds, and relying on tax advances to meet monthly targets.

All this, and still a miss. More alarming is the absence of structural effort. The promised recovery of arrears in litigation cases — a key part of the government's pitch — never materialised and refunds remained delayed. The FBR's reliance on punitive tactics instead of expanding the tax net is as evident as it is unsustainable. Compounding the problem is the IMF programme that guides Pakistan's fiscal policies.

By definition, the programme emphasises austerity and revenue generation over growth and investment, an approach that stifles economic activity and discourages business expansion. While the IMF's role in dictating revenue measures is undeniable, the government's own choices reflect poor prioritisation. Pakistan's tax regime continues to lean on the compliant and ignore the evaders. The FBR, ironically, continues to enjoy performance-based incentives while its core failure goes unaddressed.

The new Rs14.3 trillion target for FY26 risks becoming a recipe for disaster if fiscal prudence and a balanced approach between revenue collection and protecting the common man are not prioritised. The policymakers must rethink their approach to taxation as the economy cannot survive on extraction alone.