FBR Sales Tax Shortfall

FBR Sales Tax Shortfall Leads to Rs 274 Billion Revenue Gap

Islamabad, November 1, 2025 — The Federal Board of Revenue (FBR) has missed its four-month revenue collection target by Rs 274 billion, even as a record 5.9 million Pakistanis filed their income tax returns this year — the highest ever recorded.
(Source: MinuteMirror, Dawn)

Key Highlights

  • Revenue Collection: Rs 3.835 trillion collected (Target: Rs 4.108 trillion) — a shortfall of Rs 274 billion
  • October Performance: Rs 951 billion collected vs. Rs 1.026 trillion target
  • Tax Filings: 5.9 million returns filed — up 17.6 % from last year
  • Active Taxpayers: 3.6 million filers paid taxes, up 18.6 % year-on-year
  • Refunds: Rs 48 billion issued vs. Rs 19 billion a year earlier

Why Revenue Fell Despite More Filings?

While compliance (in terms of filings) is improving, the revenue shortfall is largely driven by weaker-than-expected domestic sales tax (DST) collections — a result of two major factors:

  1. Power outages reduced taxable electricity sales.
  2. Solar energy adoption shifted households and industries away from taxed grid electricity.

However, customs duty collections remained strong — exceeding targets by Rs 13 billion — signaling steady import activity.

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What This Means for Businesses and Employers

The mixed performance of the FBR affects corporates, payroll teams, and EOR (Employer of Record) service users in several ways:

1. Rising Tax Compliance Awareness

The record-high 5.9 million returns show that more people are joining the formal economy.

2. Bigger Refund Volume

Refunds increased from Rs 19 billion to Rs 48 billion, showing improved refund processing.

3. Possible New Tax Measures

Pakistan’s ongoing IMF program may push additional tax measures if FBR revenues stay weak, such as:

  • Higher GST on solar panels (10 % → 18 %)
  • More taxes on telecom and digital services
  • Increased excise duties on the fertilizer and pesticide sectors

Businesses should prepare for potential mid-year tax rate adjustments.

4. Stricter Enforcement Expected

With revenue gaps widening, the FBR is likely to tighten audits and increase monitoring.
Payroll/EOR providers must integrate digital tax records, e-filing systems, and automated compliance reports.

Bottom Line

Pakistan’s tax system is becoming more digital and compliance-driven — but still struggles with consistent revenue growth.
The number of taxpayers is rising fast, yet weaker sales-tax inflows keep widening the fiscal gap. Waystax’s Payroll & Tax Management Solutions help businesses stay compliant and automate their taxes. This makes it easier to keep pace with Pakistan’s evolving fiscal landscape