ISLAMABAD – The federal government is expected to increase its dependence on indirect taxes in the upcoming fiscal year 2025-26, with a proposed target of Rs9,732 billion. This marks a significant jump of Rs1,337 billion compared to the revised estimate for the current fiscal year.
According to official documents, indirect taxes for the outgoing year ending on June 30 were estimated at Rs8,393 billion. However, the collection may exceed this figure by around Rs594 billion, surpassing the original target of Rs7,799 billion set for 2024-25.
In comparison, the government collected Rs5,553 billion through indirect taxes in 2023-24, and Rs4,087 billion in 2022-23. This sharp rise highlights the growing role of indirect taxation in Pakistan’s revenue system, even as it sparks concerns about the burden on ordinary citizens.
Indirect taxes include sales tax, customs duties, and federal excise duties. These forms of taxation are generally passed on to consumers, making everyday goods and services more expensive. As a result, experts warn that increasing indirect taxes could fuel inflation and add pressure to already struggling households.
While indirect taxation offers a quicker way for governments to raise revenue, it is often criticized for being regressive. Unlike direct taxes, which are based on income, indirect taxes apply equally to all consumers, affecting low-income groups more harshly.
As the government prepares to present the federal budget, economic experts are calling for a balanced strategy. They urge the authorities to improve direct tax collection and reduce reliance on indirect sources, to ensure fairer and more sustainable revenue generation in the long run.