Islamabad, March 17, 2025 – The Government of Pakistan has revised its tax collection target for the fiscal year 2024-25, adjusting it from PKR 12.97 trillion to PKR 12.35 trillion after negotiations with the International Monetary Fund (IMF). The revision aims to set a more attainable revenue collection strategy while preserving economic stability in the face of ongoing challenges. The updated target comes as part of Pakistan’s broader economic strategy, designed to strike a balance between achieving fiscal goals and maintaining financial stability amid external pressures. The government hopes that this more conservative target will allow it to focus on strengthening revenue collection mechanisms while addressing the economic realities that may impede growth.
In line with the adjustments to the overall tax target, the direct tax collection goal for FY25 has been set at PKR 5.25 trillion, down from the original target of PKR 5.51 trillion. This reduction follows a steady increase in direct tax collection from the previous fiscal year. In FY24, Pakistan’s direct tax collections amounted to PKR 4.53 trillion, showing growth but still short of the initial FY25 expectations. Notably, Pakistan experienced robust tax revenue performance during the calendar year 2024 (CY24), with total tax collections reaching PKR 10.47 trillion, a significant 27% year-on-year (YoY) increase. Direct tax collections alone surged by 33%, reaching PKR 5.16 trillion, reflecting an upward trajectory in tax compliance and the effectiveness of tax collection measures.
In the first half of FY25 (1HFY25), direct tax collection stood at PKR 2.78 trillion, marking a 29% YoY increase. The growth was largely driven by the strong contributions of companies listed on the KSE-100 index, which collectively contributed PKR 687 billion, accounting for nearly 25% of the total direct tax collection. This marks a 10% YoY growth in tax contributions from the capital market, reinforcing its critical role in Pakistan’s tax revenue generation.
A breakdown of sectoral contributions to tax revenue in CY24 highlights the varying performances across different industries. Companies listed on the KSE-100 index collectively contributed PKR 1.22 trillion in direct taxes, making up 23.6% of total direct tax collection. Notably, the auto sector emerged as a significant contributor, with auto assemblers posting a 62% increase in their tax contributions. Other sectors that saw positive growth include fertilizer manufacturers, who benefited from a price surge in urea and DAP, contributing 19% more in taxes. Banks also saw a 12% YoY increase in tax payments, spurred by a policy change in late 2024 that raised the corporate tax rate from 49% to 54%, alongside the introduction of a 10% super tax. Cement manufacturers enjoyed a 34% YoY rise in tax contributions, aided by lower interest rates and enhanced profitability.
However, some sectors faced declines in tax contributions, including refineries, which recorded the sharpest drop at 47%, followed by chemicals (-30%), oil marketing companies (OMCs) (-27%), and exploration and production (E&P) companies (-18%). OMCs saw a 10% drop, largely attributed to falling retail prices of motor spirit (MS) and high-speed diesel (HSD), which squeezed their revenues. Similarly, the E&P sector experienced a higher tax burden in 1HFY25 due to the absence of the depletion allowance reversal that had benefited companies in the previous fiscal year.
As Pakistan enters the final quarter of FY25, the government remains focused on achieving its revised tax collection target through policy adjustments and economic growth initiatives. The performance of KSE-100 firms continues to be a vital contributor to national revenue generation, but the outlook will also depend on the stability of key industries and global economic conditions. The government is likely to employ targeted strategies, including further fiscal reforms and economic stimulus measures, to bolster tax revenues in the last stretch of FY25. The global economic environment, which influences local business dynamics, will also be a determining factor in whether Pakistan can meet its revised target.
In conclusion, while the government has made strategic adjustments to its tax collection target for FY25, the final performance will largely depend on the continued contributions from major sectors, particularly the capital market and key industries, as well as global economic conditions that may affect Pakistan’s growth trajectory. The ongoing efforts to balance fiscal goals with economic realities will be key in determining the success of these revisions.