Pakistan's revenue crisis deepens as corrupt tax system crumbles under IMF demands

Lahore [Pakistan], December 4 (ANI) Pakistan's struggle to meet its revenue targets for the ongoing fiscal year has once again highlighted the deep-rooted structural inefficiencies within the Federal Board of Revenue (FBR). Preliminary figures from the first quarter of FY 2025-26 reveal a shortfall of nearly Rs200 billion, signalling that the government's taxation framework remains riddled with gaps and outdated mechanisms, as reported by The Express Tribune.
According to The Express Tribune, the government had set a target requiring an annual revenue growth of 20.3%. However, the FBR has managed to achieve only 12.5% so far, widening the gap between projections and actual collections. Business leaders stated that such figures reflect not only administrative inefficiency but also a policy failure, one that relies heavily on overtaxing existing filers instead of expanding the taxpayer base.
Pakistan Industrial and Traders Association Front (PIAF) Chairman Syed Mahmood Ghaznavi warned that the government is "running out of time" to fix its flawed tax model. He noted that repeated taxation of compliant businesses cannot sustain economic growth. "The tax system has massive structural gaps that need urgent correction. Without a fair, broadened base, revenue goals will keep slipping," he stated.
Ghaznavi emphasised that instead of coercive collection tactics, the government should incentivise participation from the informal economy. Industry leaders echoed this sentiment, criticising the FBR's dependence on fragmented, outdated data, which they argue leads to poor enforcement and unfair assessments. Textile exporter Kamran Aslam added that Pakistan's tax system is stuck in the past. "You cannot run a modern economy on decades-old methods. The government must prioritise digital, data-driven reforms," he stated. Aslam further remarked that Pakistan's tax-to-GDP ratio remains among the lowest in the region because policymakers have avoided bold reforms to integrate the informal sector, as cited by The Express Tribune.
Business groups suggested a simplified fixed-tax regime at lower rates to encourage voluntary compliance. They warned that without real reform, the IMF's continued demands for fiscal tightening could further stifle growth. Pakistan's revenue crisis is not merely fiscal; it is symptomatic of a state machinery unwilling to modernise, as reported by The Express Tribune. (ANI)