Federal Govt Disputes Provincial Tax Outperformance Claims

The federal government has refuted claims suggesting that provincial tax administrations are outperforming the Federal Board of Revenue (FBR), releasing official statistics that demonstrate provincial revenue mobilisation remains substantially below federal collections despite the assignment of significant tax heads under the Constitution.

Khurram Schehzad, Advisor to the Federal Minister for Finance, addressed the matter via a post on X, clarifying: “A narrative is gaining traction that provincial tax performance surpasses the federal level and should therefore resolve questions around resource distribution. Official data, however, presents a markedly different picture.”

Citing FBR figures for FY2024-25, the advisor highlighted that federal tax receipts surpassed Rs13 trillion—equivalent to 11.3% of GDP—with projections indicating an increase to 15% of GDP by June 2028. In sharp contrast, aggregate provincial tax collections stood at only Rs979 billion, or approximately 0.85% of GDP, well short of the 3% benchmark observed in comparable federal systems.

Schehzad underscored the pronounced underperformance across key provincial domains. The services sector, constitutionally devolved to provinces and possessing an estimated taxable base of Rs29 trillion, yielded just Rs650 billion (a 2.2% effective rate). By comparison, the federally administered goods sector, with a comparable base, generated Rs3.9 trillion (a 13% yield). Agricultural income tax, another provincial subject with a taxable base of Rs3.7 trillion, contributed a mere Rs8.4 billion (0.2% yield). Property-related revenues, including stamp duties, amounted to Rs66 billion against an estimated Rs21.7 trillion asset base (roughly 0.3% yield).

The advisor emphasised that meaningful fiscal progress requires coordinated reform efforts across all tiers of government. He advocated for intensified revenue mobilisation by both federal and provincial authorities to bridge existing gaps, alleviate fiscal pressures, improve service delivery under the 18th Amendment framework, and reinforce the overall strength of Pakistan’s federation.

The exchange reflects ongoing discourse on fiscal federalism, revenue-sharing mechanisms, and the capacity of provinces to more effectively harness their assigned tax bases in support of devolved responsibilities.