THE Rs684bn shortfall in tax collection during the first 10 months of the fiscal year is a continuation of a decades-old pattern. The FBR has been trailing its target from the very outset of the fiscal year, as it so often does. This gap between ambition and performance underscores a flawed taxation system and an inefficient tax machinery. As the country’s principal revenue-collecting body, the FBR sits at the heart of fiscal stability. The government’s ability to fund its expenditures, manage deficits, provide relief to the public and maintain macroeconomic balance depends heavily on its performance. Yet, the agency has hardly ever met its targets. This underperformance persists even though tax rates on salaried individuals and formal businesses remain exceedingly high, placing a disproportionate burden on a narrow base of compliant taxpayers.

The shortfall has been attributed partly to disruptions linked to the Middle East conflict, which have affected trade flows and consumption. These factors have indeed contributed to weaker sales tax and excise collections at the import stage. But such excuses risk obscuring long-standing inefficiencies within the system. Geopolitical headwinds aside, successive governments have, in the past three decades, launched intermittent reform efforts — from organisational restructuring to rebranding to digitisation drives aimed at making the FBR efficient. However, the outcomes have been underwhelming, if not outright disappointing. The institution continues to be one of the most incompetent government agencies and prone to corruption, a reputation that has proven resistant to change. Even recent administrative incentives such as provision of vehicles and monetary incentives to field officers to boost enforcement have yielded little improvement in revenue performance. That said, placing the entire burden of blame on the FBR is both convenient and incomplete. Pakistan’s tax problem is as much political as it is administrative. For decades, successive governments, both civilian and military, have failed to undertake the politically difficult task of broadening the tax base. Large segments of the economy, including influential sectors such as agriculture, professionals, retail and real estate, remain either undertaxed or entirely outside the system. This reflects a lack of political will to undertake tough decisions due to entrenched interests and electoral considerations. Until this imbalance is rectified, the target will remain ‘over-ambitious’, and shortfalls will continue to persist.

Published in Dawn, May 2nd, 2026