Two Yearbooks, Two Narratives
Dr. Ikramul Haq
“Pakistan recorded the second-largest equity losses and the highest rise in risk premiums since the start of the year, partly reflecting uncertainty surrounding delays affecting an International Monetary Fund staff-level agreement caused by fiscal discrepancies identified in March”—Asian Development Outlook April 2026, Asian Development Bank.
Pakistan’s federal fiscal system suffers not merely from low revenue mobilisation from higher rate of taxes, but also from something far more troubling: the absence of a single, consistent narrative about taxation itself. The publication of two official documents for fiscal year 2024-25—FBR Year Book 2024-25 and Revenue Division Year Book 2025—once again highlights this deeper structural problem. Although both documents originate from the same institutional framework, rely on the same administrative machinery and report on the same fiscal year, their presentation of tax performance differs in classification, emphasis, methodology and sometimes even interpretation.
This is not merely a technical matter. When official publications present different narratives of the same fiscal year, the issue transcends statistical presentation and enters the domain of fiscal credibility. Donors, lenders, investors, policymakers, international institutions, academics, journalists and citizens alike rely on official fiscal data. Any divergence, inconsistency or lack of transparency contributes to what has repeatedly been described as Pakistan’s growing trust deficit and statistical discrepancies in taxation collection and reporting data.
The fiscal year 2024-25 was already a challenging one. Pakistan entered the year under a stabilisation programme, faced high inflation, sluggish industrial growth and weak external demand. Under such circumstances, tax performance becomes both a measure of administrative effectiveness and an indicator of economic health. It is, therefore, essential to examine how the same fiscal year is being interpreted by two official publications.
The FBR Year Book 2024-25, released as late as April 2026, as per tradition emphasises operational performance, administrative initiatives, sectoral contributions and tax collection under major heads of income. As in the past, it attempts to present revenue growth as evidence of improved enforcement and administrative efficiency. The Revenue Division Year Book 2025, on the other hand, presents a broader fiscal narrative, focusing on macroeconomic context, policy measures and revenue composition.
The first discrepancy emerges in the treatment of revenue composition. One document emphasises growth in overall tax collection, while the other highlights the relative contribution of different tax heads in a manner that suggests structural weakness. The distinction is subtle but important. Growth in nominal tax collection may reflect inflation and currency depreciation rather than genuine expansion of the tax base.
Inflation heavily influences Pakistan’s tax system. When prices rise, indirect taxes automatically increase without any improvement in compliance or expansion in documentation. This phenomenon creates the illusion of improved tax performance. If nominal growth is not adjusted for inflation, fiscal performance may appear stronger than it actually is.
The fiscal year 2024-25 saw significant inflationary pressures. Under such conditions, nominal growth in tax revenue must be carefully analysed. A comparison of the two yearbooks suggests that while overall revenue increased, the structure of taxation remained largely unchanged. Heavy reliance on indirect taxes continued, while direct taxation remained concentrated among a narrow base of taxpayers, alongside overwhelming withholdingisation.
This structural imbalance is not new. Pakistan’s tax system has long relied on withholding taxes, import-stage taxation and consumption-based levies. Such taxes are relatively easy to collect but economically distortionary. They increase production costs, discourage investment and disproportionately affect lower-income groups.
The second area of divergence concerns the classification of income tax. Income tax is often presented as the largest component of federal tax revenue. However, a closer examination reveals that a significant portion of income tax consists of withholding taxes collected at source. These include taxes on banking transactions, imports, contracts, electricity bills and mobile phone usage. The combined share of advance income tax and withholding taxes during the last five years averaged around 94 percent.
Such taxes do not necessarily reflect income-based taxation. Rather, they represent advance collection mechanisms that may not correspond to actual income. When these taxes are included under income tax, the share of direct taxation appears larger than it actually is. This classification issue has long been highlighted in fiscal analysis, yet official publications continue to present withholding taxes as part of direct taxation.
The Revenue Division Year Book 2025 to some extent acknowledges this structural reality more explicitly, while the FBR Year Book 2024-25 tends to emphasise overall income tax growth. The difference may seem subtle but has significant policy implications. If income tax growth is primarily driven by withholding mechanisms with nearly 70 percent comprising transactional taxes that are ultimately passed on to consumers, it suggests that Pakistan remains a withholding-based tax state rather than an income-based taxation system.
The third discrepancy relates to sales tax performance. Sales tax remains one of the largest sources of federal revenue. However, a substantial portion of sales tax is collected at the import stage. Import-stage sales tax behaves more like customs duty than value-added taxation. It increases the cost of imported inputs and affects industrial competitiveness.
To the extent that sales tax growth is driven primarily by import-stage collection, it reflects import price increases rather than domestic economic expansion. The two yearbooks differ in the emphasis placed on this distinction. One highlights overall sales tax growth, while the other provides a breakdown that suggests continued reliance on import-based taxation.
This distinction is particularly important in the context of Pakistan’s industrial slowdown. If domestic sales tax collection remains weak, it signals stagnation in manufacturing and services sectors. Such trends have implications for employment, exports and economic growth.
Customs duties present another area where interpretation differs. Import compression during periods of economic stabilisation often reduces customs revenue. However, higher tariff rates may partially offset this decline. The yearbooks present customs performance differently, reflecting alternative interpretations of import behaviour and tariff-driven revenue mobilisation.
Federal excise duty remains the smallest component of federal taxation but often reflects policy priorities. Excise taxes on tobacco, petroleum and luxury goods are frequently adjusted to meet revenue targets. Differences in reporting these adjustments contribute to variation in interpretation.
Beyond classification issues, the broader concern relates to transparency. Fiscal data must be consistent across official publications. When two yearbooks present different narratives, analysts must reconcile figures independently. This increases uncertainty and undermines policy credibility.
The timing of these publications also matters. Pakistan is currently preparing the budget for fiscal year 2026-27 under ongoing International Monetary Fund (IMF) engagement. International financial institutions rely heavily on official fiscal data. Any ambiguity or inconsistency complicates policy negotiations and undermines confidence.
Fiscal credibility is not merely a technical issue. It influences borrowing costs, investor sentiment and macroeconomic stability. Countries with transparent fiscal reporting enjoy lower borrowing costs, stronger investor confidence and greater macroeconomic stability. Conversely, inconsistent reporting raises concerns about governance and institutional capacity.
Pakistan’s fiscal history suggests that structural reforms require credible data. Without reliable fiscal information, policy decisions become reactive rather than strategic. The publication of two yearbooks for the same fiscal year offers an opportunity to revisit the methodology of fiscal reporting.
A unified reporting framework would enhance transparency. It would also improve policy debate by ensuring that analysts, policymakers and citizens rely on the same dataset. Such reform may appear technical but carries far-reaching implications.
The fiscal year 2024-25 should, therefore, be viewed not merely as another year of revenue collection but as a case study in fiscal transparency. The divergence between the Revenue Division Year Book 2025 and FBR Year Book 2024-25 highlights deeper structural issues in Pakistan’s tax system.
These issues will be examined in greater detail in subsequent parts of this series. The next article will analyse income tax performance, focusing on the dominance of withholding taxes and the narrow direct tax base.
Understanding these structural realities is essential for evaluating Pakistan’s fiscal performance. Revenue growth alone is not sufficient. The composition, sustainability and fairness of taxation matter equally.
Pakistan’s fiscal future depends not only on collecting more taxes but also on building a credible and transparent tax system. The publication of two official yearbooks for the same fiscal year reminds us that Pakistan’s journey toward fiscal credibility remains unfinished—and urgently in need of reform. .
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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.