FY27: IMF projects Rs15.3trn tax collection

ISLAMABAD: The International Monetary Fund (IMF) has projected the tax collection target of Federal Board of Revenue (FBR) at Rs15.3 trillion for 2026-27 against the downward revised tax collection estimates of Rs13.4 trillion for 2025-26.

The Fund in its report “third review under the Extended Fund Facility and second review under the Resilience and Sustainability Facility arrangement” noted that to mitigate the projected FBR collection shortfall and ensure that the primary balance target is achieved mostly through revenue mobilisation efforts, as a prior action, the authorities plan to collect overdue tax revenue resulting from recent court rulings in favour of FBR (0.3 percent of the gross domestic product (GDP); i.e., Rs322billion, largely stemming from “super tax”).

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The government assured the IMF a collection of Rs 92 billion additional revenue through stronger audit in 2026-27,Rs 46 billion through better monitoring and calculation of sales tax liability and Rs 48 billion additional revenue through production monitoring in the next fiscal year.

Achieving the fiscal year-2027 target requires additional revenue collection measures of 0.6 percent of GDP to address Pakistan’s low tax buoyancy and ensure that the fiscal effort is achieved through sustained growth of the tax revenue ratio.

At the federal level, revenue mobilization will focus on gains from the implementation of FBR’s transformation plan and streamlining tax expenditures (0.3 percent of GDP in revenues in fiscal year2027). In this regard, an FBR revenue collection floor is proposed to be set as a Quantitative Performance Criteria (QPCs), starting in December 2026. At the provincial level, revenue mobilization will continue to focus on broadening the GST tax base on services and the application of higher income tax rates on agricultural income.

The IMF stated that the FBR has implemented priority areas of its transformation plan including: (i) strengthening taxpayer audits by deploying the Compliance Risk Management (CRM) system, (ii) expanding and eventually making mandatory the use of digital invoicing, and (iii) enhancing production monitoring. To ensure even-handed treatment of taxpayers, the FBR will prepare an audit manual and audit policy centralizing the audit case selection process via administrative prioritization and monitoring of high-risk cases through the CRM system by end-August 2026.

The revenue gains from these interventions are likely to materialise in FY27, but they continue to target primarily existing taxpayers. Revenue administration efforts need to shift toward intensifying the retailer tax registration scheme and empowering the FBR to restrict specified high value transactions to individuals who have filed an income tax return.

The IMF stated that Pakistan’s tax base remains concentrated in a few sectors. In 2025, agricultural income tax rates were increased significantly to align with tax rates for other income; however, revenues remained below expectations reflecting implementation delays and enforcement challenges. Textiles, real estate, and business services also account for a large share of value added compared to net tax collection.

Pakistani authorities stated that new agricultural income tax rates will be applied to FY26 agricultural income (with the revenue impact materialising in FY27). Revenues from agricultural income tax fell short of expectations because of delays in the application of revised rates and other implementation challenges.

Copyright Business Recorder, 2026