The International Monetary Fund (IMF) has warned that Pakistan is losing Rs3.4 trillion annually due to tax evasion, corruption, and hidden incomes. The loss equals about 3.9% of the country’s GDP. The Fund called for urgent reforms to expand the tax base and improve accountability.
The IMF highlighted severe weaknesses in Pakistan’s tax system, including rampant evasion, widespread fake filers, and a complex legal framework. Incentives for politically influential sectors and a culture of zero-income declarations further worsen revenue collection. Currently, only around five million taxpayers are registered, far below the target needed for sustainable growth.
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To strengthen revenue, the IMF demanded registering at least 15 million taxpayers, documenting all business sectors, and cracking down on fake invoices. It also called for eliminating all tax exemptions and concessions, citing 168 SROs issued in 2024 as a major source of leakage.
The report criticized the Federal Board of Revenue (FBR) for weak internal controls, poor accountability, and a flawed refund system. The IMF warned that the informal economy is further draining Pakistan’s finances as untaxed income remains undocumented. Without reforms, billions will continue to be lost annually.
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Following its technical review, the IMF recommended better data verification, auditing, and long-term tax policy improvements. A comprehensive report on Pakistan’s budget preparation is expected in January, outlining steps to secure revenue and strengthen fiscal governance.