The government's revenue largely depends on taxes on petroleum products

The IMF has presented a worrying picture after a detailed review of Pakistan’s tax system. According to the report, the tax collections of the FBR are consistently falling short of the target and due to the limited tax net, the government is mostly dependent on taxes imposed on petroleum products, which are collected directly from the pockets of the common man. Along with this, the tax exemptions given to various sectors are equivalent to 1.2 percent of GDP.

The most surprising revelation is about the agriculture sector. This sector contributes 24.6 percent to GDP but pays only 0.3 percent tax. Agricultural income tax was increased in 2025, but the collections are much lower than expected. The IMF has directed the provinces to use FBR data to implement agricultural taxes. Textile, Real Estate and Business Services have also been declared as low-tax paying sectors.

Separate GST systems at the provincial level have also become a major problem, which is increasing the complexity. The IMF says that if the efficiency in Sales Tax is improved by 35 percent, the government can get an additional Rs 2100 billion.

Going forward, the IMF has suggested several measures, including restricting large financial transactions for non-filers, tightening tax registration for retailers, making digital invoicing mandatory in a phased manner, and implementing a new Audit Manual in the FBR by August 2026.