Pakistan’s Tax Revenue Seems to Increase by 40% in 2024-2025 Fiscal Year

June 21, 2024Zayn0

For the fiscal year 2024–2025, Pakistan’s tax growth (including the petroleum development levy) is anticipated to reach 40%, as opposed to a compound annual growth rate (CAGR) of 18% for the previous ten years. Here are the details of tax revenue for the 2024-2025 year.

Achieving the Tax Growth Target

The federal government will meet its goal, according to a Topline Securities statement, because any remaining funds, estimated at between Rs. 300 and Rs. 500 billion, can be handled through cost-cutting measures like reducing development and other ongoing costs like subsidies, etc., or by raising taxes by the middle of the following fiscal year.

In contrast to earlier expectations that the government would raise the GST by one per cent, etc., the tax measures implemented under the new federal budget are fairly balanced and less likely to cause inflation.

Tax Revenue Targets

The objective for tax income given by the Federal Board of Income (FBR) is Rs. 12.97 trillion, a 40% increase from the expected amount of Rs. 9.25 trillion collected in FY24. This exceeds both the average increase of 20 per cent over the previous five years and the FY24E growth of 29 per cent.

Potential Shortfall and Mitigating Measures

Despite the lofty goal, it is estimated that the government may raise between Rs. 12.4 and Rs. 12.7 trillion under the new tax laws.

The remaining amount can be covered by cutting back on expenses like development spending and/or subsidies/grants, etc., or by enacting new taxes, such as a further hike in PDL in the middle of the fiscal year (January 2025), etc.

Possible Challenges 

The administration has set lofty targets for tax growth in 2024 and 2025, but there may be obstacles that must be overcome. The ability of the government to accomplish these objectives may be significantly impacted by the state of the world economy and the political climate of the nation.

In Summary 

Pakistan has set high tax growth projections for the 2024–2025 fiscal year, with a 40% rise in tax income being anticipated. Even though the administration is optimistic that a mix of tax increases and cost-cutting initiatives would enable it to achieve this objective, actual revenue collection may come up just shy of the original projection. Nonetheless, Pakistan’s economic prospects are improving due to the government’s proactive approach to controlling the fiscal crisis.

Zayn

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