ISLAMABAD: The government has assured the International Monetary Fund (IMF) that it will implement agreed contingency revenue measures including 5 percent Federal Excise Duty (FED) on fertilizer and pesticides in case a shortfall in tax collection of the Federal Board of Revenue (FBR) continues till December 2025.
This was revealed in the second review of the ongoing Extended Fund Facility and the first review of the Resilience and Sustainability Facility documents uploaded on the IMF website.
Presently, 5 percent FED is applicable on fertilizer and pesticides and additional 5 percent duty would double FED rate on both these items to 10 percent. The IMF noted that the structural benchmark on the introduction of FED on fertilizer and pesticides was missed to prevent an excessive burden on the agricultural sector.
Contingency measures, the report notes, provide an important safeguard against fiscal risks adding that if revenue were to fall short of expectations by the end of this month, the authorities plan to adopt additional measures to safeguard the fiscal targets, including introducing FED on high-value sugary items, and broadening the sales tax base by moving select items to the standard sales tax rate of 18 percent. And pledged to reduce or postpone spending in response to lower revenues as a result of the National Tariff Policy (NTP).
The IMF has revised the tax collection target of the FBR downward - from Rs 14,307 billion to Rs 13,979 billion for 2025-26, reflecting a decrease of Rs 328 billion.
The FBR’s tax collection stood at Rs 4,730 billion during the first five months (July-November) 2025-26 against the target of Rs 5045 billion, reflecting a shortfall of Rs 315 billion.
The FBR deployed a variety of tools to increase revenue collection: increasing the number of audits; improving the collection of sales and withholding taxes via greater use of point of sales (POS) terminals and digital invoicing; conducting extensive outreach campaigns to encourage tax filing; and deploying various tools to physically monitor production of taxable items.
To better prioritize such interventions and more effectively focus resources, the FBR, with IMF support, will develop a comprehensive roadmap with a timeline for implementing its compliance improvement efforts.
Copyright Business Recorder, 2025
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