Karachi, November 5, 2024 – In a bid to bolster its tax-to-GDP ratio, Pakistan is set to introduce surcharges on fossil fuels as part of an aggressive revenue collection strategy outlined in the latest annual report by the Federal Board of Revenue (FBR), released on Tuesday. This initiative is in response to commitments made to the International Monetary Fund (IMF) under a new financial arrangement aimed at stabilizing the country’s economy. The FBR report emphasizes that Pakistan has committed to increasing its tax-to-GDP ratio to 13.7% by the fiscal year 2028-29. Currently, the ratio stands at a precariously low level, necessitating an additional 2.6% increase to meet this ambitious target. The report indicates that a significant portion of this increase will be derived from the imposition of surcharges on fossil fuels, alongside efforts to enhance the provincial tax base and augment non-tax revenue streams at the federal level. The recent completion of the IMF’s 2024 Article IV consultation with Pakistan, alongside the approval of a 37-month Extended Arrangement under the Extended Fund Facility (EFF) amounting to SDR 5,320 million (approximately US$7 billion), has catalyzed these reforms. The agreement, finalized on May 23, 2024, mandates a rigorous Fiscal Framework aimed at improving Pakistan’s economic resilience. Under this framework, the Government of Pakistan (GoP) is expected to achieve a tax-to-GDP ratio of 13.7%, with an ambitious target of 11.1% of that increase anticipated to come from the FBR’s intensified policy and enforcement measures. Supported by the World Bank, the FBR is implementing a comprehensive Revenue Mobilization Program as part of this reform initiative, focusing on expanding the tax net and enhancing compliance. Key components of the Medium-Term Fiscal Framework (MTFF) established under the EFF include several critical measures designed to broaden the tax base and eliminate existing inefficiencies in the tax system. Among these measures is the elimination of preferential tax treatments that have historically benefitted certain sectors, thereby reducing the overall tax contribution from the economy. The reforms also…