The International Monetary Fund (IMF) has uncovered serious flaws in Pakistan’s tax system, calling it overly complex, vulnerable to corruption, and full of ad-hoc policy changes that weaken revenue collection.
According to the report, Pakistan’s tax-to-GDP ratio has hovered around 10 % over the past five years, and the tax code is loaded with minimum taxes on turnover, transaction taxes, alternate corporate taxes and various withholding mechanisms — all layered on each other and managed via hundreds of statutory regulatory orders from the Federal Board of Revenue (FBR).
The IMF highlights how the FBR issued 168 SROs in 2024 alone, many giving discretionary exemptions to sectors or firms, which invite rent-seeking and create unequal treatment.
The tax-policy-making process is also flagged: the FBR currently controls both tax administration and tax policy, enabling influence and preferential treatments for special interest groups. The IMF recommends establishing a separate Tax Policy Office (TPO) within the Ministry of Finance, Pakistan as a gatekeeper for future tax reforms.
Without structural changes — simplification of tax laws, elimination of ad-hoc exemptions, harmonisation between federal and provincial tax regimes — the IMF warns Pakistan risks stagnation in growth, declining investment and continued revenue shortfall.