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It highlights the permanent performance of Pakistan’s tax machinery that highlights a deep structural disorder that exceeds mere numerical deficit. Reacting financial administration, over -the -counter taxing, excessive dependence and tax exemption political dynamics indicate the urgent need for institutional change.
The existing approach replies to be informal at the expense of compliance, thus eliminating public confidence and compromising the justification of the taxation system.
According to media reports, the federal government, despite imposing unprecedented financial burden on the public, has been a shocking shock by losing a target of 13 trillion from a record margin of Rs 1.2 trillion. The Federal Board of Revenue collected 11.73 trillion (temporary data) during the financial year 2024-25, registering a reduction that highlights the original target’s unrealistic nature.
Compared to the previous year, tax collection increased by 26 % or 2.43 trillion rupees. Statistics confirm the earlier warnings by free economists that the target of a mini -budget without introducing a mini -budget (SIC) tax was unacceptable. As part of its arrangement with the International Monetary Fund, the government pledged to increase the tax ratio by 10.6 %. The original proportion is slightly above 10.2 %, which has a wide variety between financial ambitions and economic performance.
The media said that the loss of Rs 1.2 trillion was not only unprecedented but it was also considered dangerously dangerous, with a record 1.3 trillion rupees imposed. The outbreak of such a shortage occurred during the financial year 2019-20, where the tax target was reduced by Rs 1.6 trillion. The government had acknowledged that the additional deposit could not exceed Rs 650 billion due to aggressive measures, due to economic activity and decline in disinfection trends.
Inflation spiral increased the collection of nominal tax momentarily. Inflation, with a digits and a softening of the economy, the tax base signed against expectations. A realistic projection of Rs 11.8 trillion in revenue now appears to be far more credible than the initially achieved target.
In an attempt to show financial stability, the government chose to put a lot of burden on the salaried class and impose a tax on almost every necessary item, including milk, vegetables and stationery. In order to compensate for the financial difference and to meet the additional state of the IMF, at the beginning of the year, the petroleum levy was reduced to Rs 78 per liter. Even the aggressive intervention failed to collect the tax at the desired level.
In March, the IMF reduced the annual tax target of Rs 640 billion. The government adjusted it for another Rs 11.9 trillion in June. The FBR was even unable to fulfill the purpose of re -designed. The government introduced measures such as digital tracking and implementation of theft sectors. Despite these efforts, the institutional structure has been largely ineffective.
The federal government approved better financial incentives for revenue personnel and allocated Rs 55 billion for capacity development programs, including digital growth and anti -trafficking infrastructure. However, this investment failed to produce immediate or appropriate results.
A widespread advertising business Dost Scheme, which has been developed to mobilize Rs 50 billion tax from the retail sector, proved to be a unpaid failure, causing less than Rs 50 million. For the financial year 2025-26, the government has now set a target of income of Rs 14.13 trillion, which requires a 20 % increase in collecting.
Creating tax revenue clarifies structural differences. The FBR lost sales tax, excise duty and customs duty goals. However, he surpassed the purpose of the income tax, deposited Rs 5.8 trillion, mainly by pressing on salaried and corporate sections, making inappropriate progress and withdrawing billions. Despite the expanded tax net, the sales tax recovery target is Rs 1.03 trillion, which reflects less performance in manufacturing and consumption. Despite the new levies on cement, sugar and fruit juice, the excise duty collection was short of Rs 187 billion. Customs duties perform less than Rs 315 billion due to low import volume.
Constitution (Eighteenth Amendment) Act, 2010, [18th Amendment]Effective since April 19, 2010, which aims to financially, has created more financial mismanagement. Provinces have shown limited ability to mobilize autonomous revenue and relieve heavily on federal transfer.
The deviation in the tax structure in the provinces has developed a contradictory system with various rates, portals and procedure requirements. The result is a scattered and expensive tax government that prevents business expansion and international trade.
Additional layers of ambiguity were added to the new provincial budget. Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan have adopted a negative list framework for sales tax on services, under which all services are taxable unless it is clearly exempt. Punjab revised its law to impose a 16 % tax on trade property fares, while Sindh imposed a 3 % rate. These moves represent a clear departure from the previous legal interpretations.
Earlier, the Sindh High Court had stated in the case of the young man that renting immovable property is not an economic activity and therefore, the sales tax cannot be taxed under the government. The decision emphasizes that rental transactions lack the features of active services. However, Sindh amended the definition of “service” in the Finance Act, 2025 so that he could grant or surrender to any right, thus adding rent on the tax base. Punjab followed a similar legislation with amendment.
Rent revenue is already subject to taxes under the Income Tax Ordinance, 2001, which reaches 25 % for individuals and 39 % for corporations. Additional implementation of sales tax turns property fares into a heavy financial activity, which eliminates investment in commercial infrastructure. The approach gives the example of a narrow financial theory based on instant income rather than a long -term economic phenomenon.
The tendency to impose multiple tax on the same income or transaction activities shows an essential need for structural recovery. Federal and provincial officials have relied on excessive taxpayers to ignore the broader informal economy. The result is the defective and growing emotions of confidence that compliance is punished rather than rewarding.
SMEs who are the founders of Pakistan’s economic ecosystem are particularly sensitive. The culprits eliminate the landscape, high compliance costs and regulatory ambiguity and growth. Instead of promoting a business, the existing framework imposes worthy responsibilities on those who remain on legal principles.
This resolution is in a comprehensive review of the tax infrastructure. The government has to prioritize the harmony of federal and provincial tax codes, set up a united digital interface and eliminate the useless audit. The stability of the tax jurisdiction of the tax options and processes can substantially reduce the operational friction and encourage compliance.
The removal of the tax has to be transferred to economic competence. Tax concessions should be linked to strategies with goals such as capitalization, job creation and diversity in exports. The non -existent sector – retail, real estate and agriculture – should be integrated through the strategies to make privileged.
The expansion of the tax base depends on the reconstruction of the systemic reputation. Practically, the impression of justice, institutional transparency and legal consistency should be reinforced by the implementation of uniform policy and judicial restrictions on taxpayers’ reservations. Tax apparatus should not be considered as partners in national development, not anti -business but as partners in national development.
The current financial route is unbearable. The repetition of lost targets, the growing dependence on reactionary taxes and the neglect of deep root reforms will continue to eliminate economic stability. The government will have to take advantage of this moment to re -form the tax as a tool for equal growth, national harmony and sustainable prosperity.
To move forward, there is a need for unprecedented commitment to the government’s cooperation and institutional reforms. The long -term operation of Pakistan’s economy is not on temporary financial adjustments, but on a change point that connects tax with comprehensive development, ensures the simplicity of the procedure and reflects a united national economic philosophy.
Dr. Ikram -ul -Haq, the author and the Supreme Court’s lawyer, is an affiliated teacher in the Lahore University of Management Sciences.
Abdul Rauf Shakuri is a corporate lawyer based in the United States.
