ISLAMABAD — The Federal Government collected over Rs13 trillion in taxes and levies during fiscal year 2025, according to official figures shared by the Federal Board of Revenue (FBR). In comparison, provincial governments together collected Rs979 billion in the same period.
Advisor to the Ministry of Finance, Khurram Schehzad, highlighted the disparity in revenue generation, stating that the Federal Government’s collections amounted to 11.3% of GDP. “Federal collections are on track to reach 15% of GDP by June 2028,” he added. In contrast, provincial tax collections remain far below their potential, contributing only 0.85% of GDP.
Schehzad emphasized that debates about fiscal federalism should focus on actual revenue outcomes rather than perceptions. “The issue is not the size of the tax base, but the revenue yield from it,” he said, noting that countries at Pakistan’s development level typically target 18% of GDP in tax revenue, with 15% expected from the federal level.
Sector-wise data from the FBR revealed significant inefficiencies in provincial collections. The services sector, which falls under provincial jurisdiction, has an estimated taxable base of Rs29 trillion, but provinces collected only Rs650 billion, achieving a yield of 2.2%. Property-related taxes also remain underutilized, with collections at just 0.3% of the estimated real estate base.
The advisor noted that provincial governments have constitutionally assigned tax powers but are failing to leverage them fully. “Federal and provincial governments are partners; closing provincial tax gaps alongside federal reforms is essential for better public services and fiscal stability,” Schehzad said.
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The figures underscore the Federal Government’s dominant role in revenue generation and the urgent need for a balanced reform agenda. Increasing provincial collection efficiency, while continuing federal reforms, is key to reducing fiscal stress and achieving a fairer distribution of resources across Pakistan.
