FBR Misses Out on Tax Revenue Target for FY25 Despite Record Collection

The Federal Board of Revenue (FBR) collected a provisional Rs. 11.735 trillion in taxes during the fiscal year 2024-25, recording a 26 percent increase over the previous year’s collection of Rs. 9.3 trillion. However, this figure fell short of the annual target of Rs. 12.3 trillion by Rs. 1.2 trillion. The target was based on an assumed autonomous growth of 15 percent, driven by projected inflation of 12 percent, GDP growth of 3 percent, growth in large-scale manufacturing (LSM) of 3.5 percent, and import growth of 12 percent. Actual autonomous growth reached only 6.1 percent, as inflation dropped below 0.3 percent in the last quarter, GDP hovered around 2.5 percent, LSM contracted by 1.52 percent, and import growth remained below 16 percent. Without policy and enforcement measures, tax collection would have been limited to an estimated Rs. 10.07 trillion. FBR’s interventions added Rs. 1.665 trillion to the base, taking the total to Rs. 11.735 trillion. Of the Rs. 2.435 trillion increase over last year, Rs. 766 billion came from autonomous growth, Rs. 805 billion from policy measures, and Rs. 865 billion from enhanced enforcement. The Rs. 865 billion collected through enforcement is the highest on record, exceeding the previous best of Rs. 105 billion. The composition of the total collection includes Rs. 5.784 trillion in income tax, showing 28 percent growth; Rs. 3.9 trillion in sales tax, up by 26 percent; Rs. 767 billion in customs duty, reflecting 16 percent growth; and Rs. 1.284 trillion in federal excise duty, an increase of 27 percent. FBR’s enforcement efforts included recovery actions against high-net-worth individuals using banking data, detection of undeclared accounts and underreported income, and improved audit selection processes. Advance tax enforcement was strengthened, and automated systems were used to identify under-payments. To tackle sales tax fraud, return formats were revised and regulatory reforms were introduced. Production monitoring systems under Section 40B were deployed in selected sectors and will be expanded to more than eight sectors. Oversight of withholding taxes improved through data-sharing with three major banks, while enforcement of point-of-sale integration was intensified in retail and wholesale sectors across three major cities. In customs, digital interventions such as faceless assessments and digital enforcement stations supported broader compliance. Drives were also launched against manufacturers operating outside the sales tax net. These measures contributed to revenue growth despite subdued economic conditions, helping FBR mobilise record collections and partially close the gap against a challenging target.