THE chairman FBR has been in the news lately, as the fiscal year closes and we tally up the revenue performance of his department to see how much blood they were able to draw from the stone that is this country’s base of compliant taxpayers. A few things stand out.
First is the sharp increase in tax collections in FY25 despite very heavy headwinds. Revenue increases in a year of anaemic growth and slowing inflation are very hard to fetch, but they seem to have found a way to do it nonetheless, a fact the chairman went to great pains to highlight. In one of his public presentations, he showed that FBR tax collection increased by Rs2.4 trillion from last year.
The final figure was still below the target, despite the latter having been revised downward multiple times during the year. But that is not the big story here. That is a matter between the government and the IMF and does not really concern the rest of us.
What we have to ask is this: where did all this incremental tax revenue come from? The chairman has emphasised that this year much of the revenue increase was not due to what they call ‘autonomous growth’, which is revenue increase that comes from raw inflation and economic growth alone. That revenue increase does not lead to an increase in the ‘purchasing power’ of the government, since its spending rises correspondingly, especially when inflation is the driver of revenue growth.
This year, according to him, the bulk of the revenue increase came from what they call ‘new tax measures and rates’, as well as ‘improved compliance’. Between these two heads, something like Rs1.67tr was collected, according to FBR figures, accounting for more than two-thirds of the total incremental revenue collection.
Even the ‘people’s representatives’ were more worried about the rights of non-filers and fraudsters than of compliant taxpayers.
So far so good. New tax measures and heightened tax rates alone brought in something like Rs805 billion, but nowhere can one find a breakdown of this figure to learn which revenue heads contributed the bulk of this increase. But take a quick look at the July to March figures released by the finance ministry on its website. In the July to March period, the data there shows an increase of Rs1.7tr in FBR tax collection, of which Rs863bn comes from ‘direct taxes’. Based on reporting from earlier this year, you can be certain that an appreciable portion of this increase comes from taxes paid by salaried individuals.
And therein lies the rub. The chairman is keen to tell us that he has performed a great feat and raked in incremental revenues under very difficult conditions. But he is not willing to give us a breakdown of where this money has come from. If he were to do so, the data would most likely show that the FBR has pulled off this great feat by squeezing more from a few, rather than increasing the base of taxation. They have succeeded in pulling blood from a stone. If this is not the case, they should release a breakdown, which shows the largest revenue heads that have contributed to the Rs805bn increase in collection from ‘new taxes and rates’.
Their one initiative to try and broaden the base was the so-called Tajir Dost Scheme, and although the finance minister went on record as late as February saying that he stood by the scheme, despite its rather dismal performance till then, they had to admit defeat and abandon it barely a month later. Revenue collection under that scheme was then replaced with withholding taxes on unregistered retailers, which they say led to a large increase in retailers registering themselves, and in some cases even a net positive tax liability.
This is the crux of the problem that needs to be highlighted over and over again. Salaried people have seen their purchasing power burn in the inflationary fire that raged ferociously from 2021 to 2024. As soon as that fire was doused they saw a raft of taxes. First, they had to pay for the state’s excesses in pushing growth via reckless money supply creation. Then they had to pay for bridging the state’s fiscal deficit.
At least some of the money they have been forced to contribute has gone to increase compensation for government servants (including military officers) and ministers. The state shields itself and its personnel from the effects of its own excesses and incompetence. And compliant salaried people, who belong to all sections of the middle class, have to foot the bill.
What makes this possible is the near total absence of any voice that salaried people have in the country’s policy conversation. When the Finance Bill 2025 came up for discussion in the National Assembly Standing Committee on Finance, objections were raised on the tax on solar panels, the powers of arrest for FBR officers and the provisions that would make it more difficult for non-filers to buy and sell high-value assets.
But there was barely a whisper about salaried people or taxes on business income, which hits small and medium enterprises harder than large manufacturers. Even the so-called people’s representatives were more worried about the rights of non-filers and tax fraudsters than the massive burden placed on compliant, honest payers.
Now begins round two of this charade. For the fiscal year which began this week, they have to pull this feat off one more time. FBR revenues have to rise by Rs2.4tr all over again, but already, the stone has nearly been bled to death. Some amount of this will come from ‘autonomous growth’ though that amount will be smaller due to lower inflation. And the rest, dear reader, will land on your doorstep, regardless of how you feel, and irrespective of what magic trick they are claiming they intend to pull off next year. Happy new fiscal year to all my readers.
The writer is a business and economy journalist.
Published in Dawn, July 3rd, 2025