• Govt mulls reducing FBR’s tax target to Rs13.7tr from Rs14.13 tr.
• Reduction of tax target by Rs300-500bn for FY26 possible.
• Flood levy to be imposed on high-net-worth sectors, individuals.

ISLAMABAD: After missing the deadline to privatise the Pakistan International Airlines (PIA), the government is preparing different scenarios to revise downward the Federal Bureau of Revenue’s (FBR) tax collection target in the range of Rs300 billion to Rs500 billion for the current fiscal year, The News reported on Thursday.

On the one hand, there is a possibility of reducing the FBR’s annual tax collection target from Rs14.13 trillion to Rs13.7 trillion or Rs13.9 trillion, taking into account the potential revision in the macroeconomic framework. 

There is another proposal on the cards on account of slapping a flood levy in order to generate the resources for the utilisation of funds on rehabilitation and reconstruction efforts.

The government is finalising the exact details for the proposed flood levy, which is expected to be imposed on high-net-worth sectors and individuals. 

According to initial estimates worked out for flood damages, the country’s major crops such as rice, sugarcane, and cotton are expected to face losses of 15%, 5.7%, and 10%, respectively. 

The livestock has also faced losses. This will result in a revision in the real GDP growth target from 4.2% to around 3%. The CPI-based inflation is also expected to go up from the 5-7% range to 8%.

When contacted, one senior official said that the FBR’s revenues might face revenue losses in the first half (July-December) period to the tune of Rs300 billion. The losses incurred by the agriculture sector might erode the purchasing power of the farm sector, so there are estimates of hurting the collection of Sales Tax.

But the independent tax experts fear that the revenue losses might go close to Rs500 billion for the current fiscal year. 

The FBR high-ups argued that the revenue losses would start recovering in the second half (Jan-June) period because the remaining crops, such as wheat, might achieve better yields.

On the privatisation front, the government has missed the deadline for privatising the PIA transaction by August 2025. 

The privatisation of First Women’s Bank and HBFC transactions by May 2025.

A financial advisor has been hired for the privatisation of three batch distribution companies (Iesco, Fesco, Gepco), and sell-side due diligence is currently underway, with bidding targeted for December 2025. 

The government is now targeting a third bank, ZTBL, for privatisation by the end of this year, and aims to initiate the process for hiring a financial advisor for the privatisation of Batch II Discos (Hesco, Sepco, Pesco) by the end of April 2025, but this could not be accomplished.

The government wants to move towards Genco privatisation, with bidding for Nandipur targeted for January 2026. The transaction structure for the Roosevelt Hotel is still underway. 

The government aims to continue to prioritise the privatisation of commercial state-owned enterprises (SOEs), with the highest priority on profitable commercial SOEs, and supported by the completion of SOE privatisation classification, to reduce the government’s commercial footprint and attract investments that can contribute to Pakistan’s development.

These efforts should be supported by fundamental structural reforms to restore the power sector to viability. 

Key measures include continued progress on Disco privatisation and/or moves toward private concessions to improve Disco performance and services; sustained efforts to shift captive power to the electricity grid; complete the restructuring of the National Transmission Dispatch Company to improve efficiencies; privatising inefficient public generation companies; and making further gradual progress toward a competitive electricity market. 

The Pakistani authorities have committed to ensuring that the implementation of these reforms will bring the flow of any new Circular Debt (CD) to zero by FY31 (when the above stock operation ends) at the latest.