The Federal Board of Revenue (FBR) expects direct taxes to contribute around 50 percent of Pakistan’s total tax collection in fiscal year 2026-27, according to its latest revenue forecasting report.
The report projects direct taxes to maintain their dominant share in overall tax revenue during FY27, reflecting a gradual shift in Pakistan’s tax structure.
FBR said the rising share of direct taxes points toward a more balanced and equitable taxation system by reducing reliance on indirect taxes, which are mainly collected through consumption and trade.
The tax authority noted that a higher contribution from direct taxes generally improves fairness in the system, as income-based taxation is considered more progressive than indirect levies. It also reduces the government’s exposure to fluctuations in consumption patterns and international trade.
According to the report, direct taxes are expected to provide more stable revenue over the medium term, especially as Pakistan continues to implement documentation, digitization, and tax compliance reforms.
FBR said the projected rise in revenue, along with the changing composition of tax collection, reflects not only higher tax receipts but also improvements in the quality of revenue mobilization.
The report added that the shift toward direct taxation would help strengthen fiscal sustainability and support the government’s goal of building a more resilient and equitable tax system.
