ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial Tuesday said that to achieve a national tax-to-GDP ratio of 18 percent by 2027–28, the provinces would be required to contribute three percent (currently 0.8 percent), amounting to Rs5.265 trillion annually (currently Rs961 billion), and the federation 15 percent (currently 11.3 percent, including the petroleum development levy (PDL)).
In a recorded press conference, flanked by Minister of State for Finance Bilal Azhar Kayani, the FBR chairman warned that provisions in the law would be invoked to block avenues for tax fraud.
On the criminal side, the scope of the law has been revised, and no criminal clauses will be used for tax recovery—only to prevent tax fraud.
Langrial stated that tax collection through enforcement measures increased eightfold in 2024–25. The federal revenue (FBR + PDL) to GDP ratio is expected to reach 15 per cent by fiscal year 2027–28, while provinces will need to accelerate efforts to achieve three per cent during the same period. The federal revenue (FBR + PDL) to GDP ratio increased to 11.3 per cent in 2024–25, compared to 9.8 per cent in 2023–24, marking the highest growth.
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“For the first time, all credible international institutions have recognised the FBR’s efforts in additional revenue collection through improved compliance,” said the FBR chairman, adding that last year, the FBR’s revenue-to-GDP ratio increased to 10.2 percent during fiscal year 2024–25—significantly higher than in the last 10 years. In June 2023–24, it was just 8.8 percent. He emphasised that the country needs to enhance the tax-to-GDP ratio to ensure sustainable economic growth.
The increase in the tax-to-GDP ratio is due to three factors, including autonomous growth through inflation. Last year, Rs1.9 trillion was collected from inflation, while this year, ending in June 2025, Rs766 billion was received. In fiscal year 2023–24, new taxes and rates generated Rs107 billion, while this year, Rs805 billion was generated. The biggest shift came from enforcement and implementation this year, with a focus on compliance. Last year (2023–24), Rs105 billion came through compliance; this year, it was Rs865 billion—an eightfold increase in implementation for compliance rate improvement.
“In 2024–25, we are standing at a 12.1 per cent tax-to-GDP ratio, including 0.8 per cent from provincial contributions. The remaining 11.3 per cent comes from the federation, which includes one per cent PDL and 10.2 per cent from the FBR,” said the chairman, adding that provinces are collecting three taxes: property tax, agriculture income tax, and sales tax on services.
Langrial said that taxpayers are the most important stakeholders in Pakistan’s revenue system, and the government is committed to rebuilding trust between the tax machinery and the people. He emphasised that tax compliance must be based on facilitation, fairness, and transparency—not intimidation or coercion.
“Anyone who pays their taxes honestly is a crown jewel for the FBR and the nation. They are the reason this system functions,” he said, adding that the FBR has undergone substantial internal reforms over the past year aimed at changing institutional behaviour and making the organisation more service-oriented. He added that FBR offices would remain open to facilitate taxpayers.
The chairman strongly rejected the use of pressure tactics in tax collection, making it clear that the FBR’s mandate is not to extract more than what is legally due. “Our officers are not expected to collect more money—they are expected to collect the right amount. That is the principle we are working with,” Langrial stressed.
He further said that the FBR is working towards a culture of mutual respect and partnership with taxpayers, asserting that enforcement will be used judiciously and only when required to ensure compliance.
Kayani said that the effective fiscal and monetary policies introduced by the incumbent coalition government had resulted in the positive performance of various economic indicators and put the economy on a sustainable growth path. The minister said the headline inflation dropped to 4.5 per cent from 28 per cent recorded when the current government took office in 2024.
He said, the policies helped stabilise macroeconomic fundamentals without resorting to supplementary or mini-budgets, “We outperformed our own expectations,” he said, adding that the policy rate was also reduced from 22 per cent to 11 per cent during the same period. The minister noted that a new three-year Extended Fund Facility (EFF) was successfully negotiated with the International Monetary Fund (IMF), which formed the foundation of the government’s macroeconomic stabilisation strategy. Contrary to public skepticism, he said, the agreement was timely and comprehensive, and no additional fiscal tightening was needed beyond initial commitments.
The government also posted a current account surplus of $1.8 billion, while foreign exchange reserves climbed to $14 billion by June 20, 2025—levels not seen in recent years. The minister acknowledged that declining reserves had historically been the country’s biggest economic vulnerability and one of the primary reasons for repeated IMF engagements. However, he asserted that improved trade balances and reduced reliance on imports had helped reverse this trend.
He said the FBR recorded an impressive 26 per cent growth in revenue collection during the fiscal year. Regarding the recently-passed federal budget, the minister credited both houses of Parliament for their constructive role and cross-party support during lengthy legislative processes.
He said the budget was focused on consolidating macroeconomic stability while pivoting towards export-led and sustainable growth.
The prime minister’s vision, he added, is to build an economy that earns more foreign exchange, reduces external vulnerabilities, and creates inclusive prosperity.
The government’s new five-year export policy aims to remove additional customs duties and rationalise maximum import tariffs to 15 per cent, the minister explained. This, he said, would reduce the cost of machinery and raw materials for export-oriented industries, making them more competitive globally and encouraging industrial investment.
The minister also highlighted targeted relief for salaried individuals, noting that income tax burdens had been reduced, resulting in higher take-home pay. He projected inflation for the upcoming fiscal year to remain between 6.5 per cent and 7.5 per cent, while salary increases would exceed that range, helping to protect real incomes.
Copyright Business Recorder, 2025