Pakistan’s federal government is considering major changes to the country’s tax administration, including the possibility of establishing a new tax collection agency or further restructuring the Federal Board of Revenue (FBR). The move comes amid concerns over revenue performance and the limited results of previous reform efforts.
Prime Minister Shehbaz Sharif has directed the FBR to prepare a comprehensive reform plan by October 19, covering human resources, institutional restructuring, and administrative improvements. The proposals are expected to help the government determine how Pakistan’s tax collection system can become more effective.
Government Explores Options for Tax Administration Reform
The idea of creating a separate national tax collection agency was discussed during a high-level government meeting held last Saturday. Following the meeting, FBR Chairman Rashid Langrial instructed officials to prepare recommendations for consideration by the prime minister.
However, the government has not yet made a final decision. Discussions are still at an early stage, and officials are examining different approaches to improving the existing system before determining the next course of action.
According to reports published by The Express Tribune, the FBR is working on proposals in line with the prime minister’s instructions. The board has indicated that the current emphasis remains on strengthening existing operations through staffing changes, improved technology, and more efficient administrative procedures.
The FBR has also dismissed speculation that tax collection responsibilities could be handed over to a private company.
What Could a New Tax Agency Mean for the FBR?
One proposal under consideration involves establishing a separate tax collection organisation while allowing the FBR to continue operating alongside it. Under this arrangement, employees who do not move to the new institution could remain in their existing positions until retirement.
Such a change would require significant legal and administrative adjustments. Establishing a new agency with powers currently held by the FBR could involve amendments to the Federal Board of Revenue Act, 2007, as well as changes to other relevant tax laws.
The final structure will depend on the government’s assessment of the available options and the recommendations submitted by the FBR.
Previous Reform Efforts Have Yet to Resolve Key Challenges
Pakistan has attempted to modernize its tax administration several times over the past two decades. These initiatives have included transforming the Central Board of Revenue into the FBR, reorganizing employee service structures, and introducing changes to the institution’s operational framework.
In 2024, the government also launched a transformation programme worth more than Rs55 billion to improve the tax system. An earlier proposal under the caretaker government sought to separate Customs operations from Inland Revenue functions.
Despite these efforts, concerns about revenue collection and the country’s narrow tax base remain central to the government’s economic agenda. The latest discussions reflect another attempt to address longstanding structural challenges within the tax administration.
Pakistan Faces Pressure to Increase Tax Revenue
The proposed reforms come at a time when Pakistan is under pressure to strengthen public finances and improve domestic revenue generation.
The country’s tax-to-GDP ratio stood at 10.3% in the previous fiscal year, while the FBR collected more than Rs1.1 trillion less than its original annual target. These figures highlight the gap between the government’s revenue ambitions and actual collection performance.
For the current fiscal year, the government has set an ambitious tax collection target of Rs15.263 trillion. Achieving this goal would require revenue growth of more than 17%, placing additional pressure on the tax administration to improve compliance and collection efficiency.
Expanding the number of taxpayers, reducing tax evasion, improving documentation of economic activity, and making tax procedures more transparent are among the broader issues facing Pakistan’s revenue system.
Technology and Administrative Changes Could Play a Key Role
Whether the government establishes a new agency or restructures the FBR, the effectiveness of the reforms will depend on their implementation.
Better digital systems could help identify undeclared economic activity, improve monitoring, and reduce opportunities for errors or manipulation. Clearer accountability mechanisms and more efficient internal processes could also support better performance.
At the same time, institutional restructuring alone may not be sufficient to address the country’s revenue challenges. Sustainable improvements will also depend on broader tax policy, compliance, public confidence, and the government’s ability to bring more economic activity into the documented tax system.
October 19 Deadline Could Shape the Next Phase
Prime Minister Shehbaz Sharif is expected to review the FBR’s reform proposals on October 19. The review could help clarify whether the government intends to retain the existing institutional structure with significant changes or move towards creating a separate tax collection agency.
For now, the proposal remains under consideration, and no final policy decision has been announced.
The outcome could have important implications for Pakistan’s tax administration, government revenue, and the way individuals and businesses interact with the tax system. The key question is whether the proposed changes will deliver lasting improvements in tax collection, institutional accountability, and compliance.
Ultimately, the success of the reform process will be measured not simply by the creation of a new organization or changes to the FBR’s structure, but by its ability to produce more consistent revenue growth and a more transparent, efficient tax system.