Federal Board of Revenue eyes new performance metrics

ISLAMABAD: In a major shift from past practice, the Federal Board of Revenue (FBR) is considering replacing monthly tax collection targets with a fiscal-year-based performance evaluation system for its field formations, aiming to reduce pressure to chase short-term revenue targets and to focus on annual collection outcomes, informed sources told Dawn.

The proposal is being discussed as part of a broader restructuring of tax administration following sweeping changes introduced through the Finance Act 2026-27. The reforms seek to transform tax enforcement by reducing human interaction and introducing centralised, technology-driven assessment and audit functions from Islamabad, while field offices remain primarily responsible for revenue collection.

The move reflects growing recognition within the tax administration that monthly collection targets often distort performance assessments because revenue flows are influenced by factors such as refunds, import cycles, advance tax payments and court decisions, many of which are beyond the control of field officers.

The proposal also follows a wider redistribution of responsibilities within the federal government. Tax policy formulation has already been separated from the FBR and transferred to the Tax Policy Office in the Ministry of Finance, while tariff policy now falls under the Tariff Policy Board in the Ministry of Commerce. As a result, enforcement and revenue collection remain the FBR’s principal functions.

Annual tax effort, compliance to replace monthly checks

Official sources said the proposal comes amid renewed scrutiny of the practice of judging the FBR’s performance against monthly revenue targets. The officials argue that these targets are not pure forecasts but are linked to budget financing requirements and commitments made under the International Monetary Fund programme.

According to tax officials, annual revenue targets approved by parliament are driven by the government’s fiscal needs rather than solely by economic projections. They point out that headline targets are frequently revised during the fiscal year following consultations with the IMF, suggesting they are aspirational benchmarks rather than precise estimates of expected collections.

To support the proposed shift, the FBR has relied on international case studies and global benchmarks that do not treat monthly target achievement as a measure of tax administration performance.

According to sources, one of the key examples cited in the proposal is India’s Central Board of Direct Taxes (CBDT), which operates on an annual collection cycle. Regional tax formations are assigned yearly revenue targets, while monthly and fortnightly collection figures are compiled only for internal monitoring and management purposes. Public evaluation of the institution is based on annual performance rather than monthly target attainment.

The second benchmark cited by the FBR is the Organisation for Economic Cooperation and Development’s International Survey on Revenue Administration, widely regarded as the leading global assessment framework for tax authorities. The survey covers 58 advanced and emerging economies, accounting for about 90pc of global GDP, and evaluates tax administrations on indicators such as cost of collection, on-time filing rates, tax arrears as a share of net revenue, electronic filing penetration, and dispute resolution performance.

The proposal notes that the OECD framework does not include any indicator measuring achievement of monthly revenue targets, reflecting the international view that monthly collections can be affected by factors such as refund payments, import cycles, advance tax instalments, commodity prices, and litigation outcomes.

Officials supporting the proposed shift argue that tax administrations worldwide generally evaluate performance annually. Monthly figures are used as management tools but are rarely treated as public indicators of institutional success or failure.

Despite falling short of headline targets in recent years, the FBR posted collections of Rs11.74 trillion in FY25, up 26.3pc from Rs9.29tr a year earlier. Officials say the tax-to-GDP ratio increased from about 8.9pc to 10.6pc in FY2025, representing a rise of roughly 1.5 percentage points in a single year against a decade-long average of around 8.7pc.

At the same time, the number of tax return filers rose from 4.5 million to more than 7.2 million over the course of a year.

The proposal comes as the government has set a fresh revenue target of Rs15.26tr for FY2026-27. Revenue experts caution that reliance on ambitious targets can intensify pressure on existing taxpayers through year-end enforcement drives while doing little to address structural weaknesses in the budget-making process.

They argue that the focus should shift from monthly shortfalls to whether Pakistan is making sustained progress in broadening the tax base and increasing its capacity to finance public expenditure through domestic revenues.

Under the proposed framework, tax officers would be assessed on broader indicators of tax effort, compliance and annual revenue growth rather than month-to-month fluctuations in collections, sources said.

Published in Dawn, June 28th, 2026

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