ISLAMABAD: The Federal Board of Revenue (FBR) missed its collection target by Rs28 billion in May owing to a slowdown in the economy and disruptions linked to the ongoing Middle East conflict.
Tax officials said the widening gap between target and collection became more pronounced over the past three months, as the war in the region affected trade flows, import volumes and overall economic activity.
The one-week Eidul Azha holiday had also significantly affected revenue collection.
In May, the FBR collected Rs967 billion, against a downward-revised target of Rs994bn for the same month, reflecting a shortfall of Rs28bn. However, collections still recorded a year-on-year increase of 7pc, compared with Rs906bn collected in the corresponding month last year.
Generates Rs967bn amid economic slowdown and Eid holidays
In the last budget, the government had projected a revenue collection target of Rs14.131 trillion, which was subsequently revised downward to accommodate emerging shortfalls in revenue collection, in consultation with the International Monetary Fund (IMF).
The FBR’s annual revenue target has now been further revised downward to around Rs13tr, implying a gap of over Rs1tr, officials said, adding that the IMF has set an even lower benchmark than the revised projection.
The IMF will be happy with the petroleum levy collection performance, which reached Rs1.205tr during the first nine months of FY26. The levy has emerged as a key revenue instrument used to offset the tax shortfall in FY26, with the annual target set at Rs1.468tr.
In FY25, the FBR missed its collection target by nearly Rs163bn, even after two downward revisions and raised Rs11.737tr against the revised target of Rs11.900tr. However, the collection reflects a year-on-year growth of 26.19pc from Rs9.301tr in FY24.
After the downward revision in the collection target, the FBR still fell short by Rs25bn during the first 11 months of 2025-26. Total collection stood at Rs11.232tr in 11MFY26 against the revised target of Rs11.257tr for the same period, suggesting that the shortfall is being offset through higher petroleum levy receipts.
However, the collection recorded a growth of 10pc compared to Rs10.202 trillion in the corresponding period last year.
Further analysis showed that sales tax and federal excise duty collected at the import stage recorded a paltry growth, while withholding tax and customs duty rose marginally in May. This suggests that despite stable or slightly higher import values in certain categories, the tax base linked to consumption and excisable goods weakened.
In contrast, domestic sales tax showed a relatively stronger performance. The data indicate that revenue dynamics were shaped by subdued consumption and selective import compression. Growth in customs duty and domestic sales tax provided some support, but weakness in import-stage sales tax and excise duty highlights pressure on consumption-led tax streams.
The FBR issued Rs551bn in refunds and rebates to taxpayers during 11MFY26, up from Rs460bn a year earlier, an increase of 19.78pc.
Income tax collection surpassed a downward revised target by Rs27bn at Rs5.539tr in 11MFY26. However, a 14pc increase was recorded compared to Rs4.879tr in the corresponding period last year.
Similarly, sales tax collection totalled Rs3.771tr, recording a shortfall of Rs28bn against the downward-revised target of Rs3.799tr, though it marked an 8pc rise over last year’s Rs3.497tr. Customs duty collection stood at Rs1.178tr, against the Rs1.205tr target, resulting in a shortfall of Rs27bn. However, it grew by 2pc compared to Rs1.154tr last year.
In contrast, the Federal Excise Duty collection reached Rs745bn, surpassing the projected target of Rs741bn and growing by 11pc from last year’s Rs672bn.
Published in Dawn, May 31st, 2026