In yet another sign of systemic dysfunction, Pakistan’s tax collection machinery has once again missed its revenue target—deepening fiscal pressures on an already fragile economy.
The shortfall, which has become a grimly familiar annual ritual, is more than a budgeting inconvenience.
It reflects structural failures, exposing the hollowness of the state’s promises of reform.
At stake is not just revenue, but the legitimacy of the state’s social contract.
The Federal Board of Revenue (FBR), Pakistan’s central tax authority, has reportedly fallen short of its collection target for the current fiscal year.
While the exact figures vary depending on revised targets and optimistic projections, the underlying problem remains unchanged: Pakistan simply does not collect enough tax to fund its basic functions, let alone invest in development or social uplift.
This is not a new phenomenon.
Pakistan has one of the lowest tax-to-GDP ratios in the region, hovering around 9 to 10% — far below the threshold required for a functioning state.
Yet despite repeated warnings from economists, international donors and domestic policy circles, successive governments have failed to address the core issues behind this recurring failure.
Every year, the FBR sets ambitious targets, often under pressure from the International Monetary Fund (IMF) and other global lenders.
These targets are based on assumptions that rarely hold true—about economic growth, inflation, import volumes and improved compliance.
What follows is a predictable cycle: overestimation, underperformance and last-minute fiscal juggling to mask the gaps.
This year is no different.
A stagnant economy, declining imports and limited investment activity have all contributed to the revenue shortfall.
The deeper ailment lies in Pakistan’s broken tax structure, where the burden is disproportionately placed on the already taxed—formal businesses, salaried employees and indirect consumption taxes.
Agricultural income, real estate speculation and vast informal markets continue to operate with minimal or no tax oversight.
The result is an inequitable and inefficient system that not only fails to generate sufficient revenue but also breeds resentment and erodes trust in government institutions.
One of the most glaring reasons behind the recurring tax debacles is the political class’s unwillingness to confront entrenched interests.
Large landowners, real estate tycoons and the trading elite have effectively shielded themselves from meaningful taxation for decades.
Attempts to broaden the tax net are met with resistance and lobbying.
Every Finance Minister who has hinted at agricultural tax reform or bringing traders into the formal economy has either been forced to walk back their plans or shown the door.
The result is a tax code riddled with exemptions, loopholes and special treatments—all designed to benefit the powerful at the expense of the public good.
The consequences are plain to see.
The state leans increasingly on indirect taxes—such as sales tax and fuel levies—that hit the poor and middle class hardest.
Rather than redistribute wealth, the tax system in Pakistan entrenches inequality, perpetuates informality and weakens state capacity.
The FBR itself is no paragon of efficiency.
Allegations of corruption and a lack of accountability have dogged the institution for years.
While periodic efforts are made to digitise systems and improve enforcement, these are often superficial and piecemeal.
Structural reform of the tax bureaucracy has been discussed endlessly, yet little progress has been made in transforming the FBR into a transparent and service-oriented institution.
Taxpayers view the FBR not as a partner in national development but as a predatory entity to be avoided at all costs.
A truly reformative approach would focus on simplifying the tax code, reducing discretionary powers and incentivising compliance.
But that requires both vision and political capital—resources perpetually in short supply.
Pakistan’s reliance on the IMF has made tax collection targets a central issue in its bailout agreements.
Every tranche of funding is tied to the promise of greater “fiscal discipline” which includes raising more revenue.
The IMF, understandably, wants Pakistan to reduce its budget deficit and increase domestic resource mobilisation.
But the implementation of these conditions often comes at a steep political cost.
Instead of targeting untaxed sectors or reforming systemic inefficiencies, governments resort to raising existing taxes.
This breeds cynicism and fatigue among taxpayers who feel unfairly burdened.
Underfunded schools, crumbling hospitals, water shortages, power outages and rising public debt all stem in part from the state’s inability to finance itself.
Each tax shortfall translates into more borrowing, more austerity and more economic pain for those who can least afford it.
A dysfunctional tax system is not just a financial liability; it is a moral and strategic failure.
Ultimately, the recurring failure to meet tax collection targets reflects a deeper legitimacy crisis.
Pakistan’s state is caught in a vicious cycle of low revenue, poor service delivery and eroding trust.
As long as the wealthy and powerful remain beyond the reach of the tax net, and the poor bear a disproportionate share of the burden, this cycle will continue.
The shortfall in tax collection is not just an administrative lapse—it is a symptom of a broken system that prioritises expedience over reform, privilege over equity and rhetoric over reality.
The price of that failure is borne not by those who evade taxes, but by the millions who continue to pay the cost of a state that cannot—or will not—reform itself.
The writer is an educator, based in Sindh. (channaassadullah320@gmail.com)
