Pakistan plans tougher enforcement as FY27 tax target seen at Rs15.3tn, says brokerage house

With the budget for fiscal year 2026-27 (FY27) just around the corner, Pakistan’s tax collection target is likely to be set at around Rs15.3 trillion, reflecting an increase of nearly 14% compared to the downward revised target of Rs13.4 trillion for the ongoing fiscal year, according to estimates by Taurus Securities.

The brokerage house, in its report titled Federal Budget FY27 Preview: Walking the recovery path upholding fiscal discipline, said that the proposed target comes at a time when the Federal Board of Revenue is facing a tax shortfall of around Rs683 billion during the first 10 months of FY26, highlighting the government’s continued reliance on aggressive revenue mobilisation measures to meet commitments agreed with the International Monetary Fund.

“Consequently, the government is likely to introduce ~Rs430 billion in additional revenue measures each at both the federal & the provincial levels. Wherein, a major portion is expected to come from collections through stricter enforcement and administrative measures,” read the report.

The report noted that authorities are considering generating nearly Rs780 billion through enforcement-related collections, potentially allowing the government to avoid imposing major new taxes in the upcoming budget.

“However, we believe this proposal to be less likely to go ahead completely with the IMF,” said Taurus Securities.

The government is also expected to set a fiscal deficit target of 3.5% of GDP and a primary surplus target of 2% of GDP for FY27.

As per the report, the upcoming budget is also expected to provide some relief to the salaried class and the corporate sector.

“However, the government has committed to the IMF to adopt a ‘net-zero effect on revenue’ approach to offering any reliefs. This means that the loss in tax collections due to the reliefs would be compensated by reciprocating additional taxation measures elsewhere and stricter enforcement.”

Proposals under consideration include reducing tax rates across salary slabs, exempting annual income up to Rs1 million from tax, and abolishing the 10% surcharge on high-income earners.

In addition, the government is considering a phased reduction in the super tax and gradually lowering the corporate tax rate to 22% over the long term. Other relief proposals include the withdrawal of capital value tax and advance tax on exporters, although authorities are reportedly not in favour of removing taxes on inter-corporate dividends.

On the revenue side, non-tax income is expected to remain heavily supported by profits from the State Bank of Pakistan and petroleum levy collections. SBP profits exceeded Rs2.4 trillion in FY26, while petroleum levy collections crossed Rs1.2 trillion during the first nine months of the current fiscal year.

“We expect the trend to continue in FY27 also. However, with a lower average policy rate for FY27, the quantum of profit might be lower,” it said.

The report estimates that petroleum levy collections could exceed Rs1.7 trillion next year, with average levy rates on petroleum products remaining elevated to offset revenue pressures. The carbon levy on petrol and diesel is also expected to rise to Rs5 per litre in FY27.

Meanwhile, the federal Public Sector Development Programme (PSDP) allocation for FY27 is likely to be set at Rs1.126 trillion, significantly lower than the Rs2.9 trillion demand put forward by the Ministry of Planning due to fiscal constraints.

Among other key proposals under consideration are a fixed tax scheme for retailers, expansion of the Third Schedule of the Sales Tax Act to include additional FMCG items, and stricter implementation of digital invoicing systems. Provinces may also be required to generate an additional Rs430 billion through enhanced sales tax enforcement and higher agricultural income taxes.

The report further indicated that stricter measures against non-filers, including enhanced access to banking data and restrictions on property and vehicle purchases, are also under consideration as part of efforts to broaden the tax base.