Some things you know, but when you see them laid out on a broader canvas, the picture hits differently. That’s precisely what the Federal Board of Revenue’s (FBR) half-yearly tax collection data does—it doesn’t just show numbers, it tells a story. And the story is clear: Pakistan’s taxation strategy has punished its honest taxpayers while fuelling inefficiencies.
Three patterns stand out, shaping both the present and future of taxation in Pakistan: the relentless squeeze on salaried individuals, the explosive rise of electricity taxes, and the quiet shift from petroleum taxation.
The past ten years have been brutal for salaried taxpayers. A decade ago, withholding tax (WHT) on salaries made up just 11 percent of total WHT collection. Today, it stands at 17 percent, second only to contract-based tax deductions. Over this period, total WHT collection has quadrupled, but tax collection from salaries has grown 6.5 times—far outpacing both inflation and real wage growth.
This isn’t because Pakistan suddenly has a booming middle class or because salaries have grown at breakneck speed. It’s because tax rates have risen disproportionately, with most of the burden falling on those already in the formal net. The numbers speak for themselves: the Rs265 billion collected from salaried individuals in just six months of FY25 already exceeds the total annual collection of FY23. At this rate, the figure will double in no time.
For years, petroleum products were the FBR’s go-to cash cow. Not anymore. The biggest revenue shift in domestic taxation has come from electricity—and it’s happening at a staggering pace.
Ten years ago, sales tax on electricity accounted for just 6 percent of total domestic GST. Today, that figure stands at 35 percent—the single largest share. In 1HFY25 alone, GST on electricity brought in more revenue than the entire domestic GST collection of FY15. The 18-fold increase in electricity taxation over the past decade is unmatched by any other revenue stream.
And that’s not all. Advance tax on electricity bills now ranks among the top six WHT revenue sources, alongside a barrage of surcharges that take the total tax burden on electricity close to Rs1 trillion annually—a quarter of the total value of electricity produced.
The repercussions? Electricity consumption is stagnant at levels seen seven years ago, while taxes have skyrocketed. Pakistan’s energy mix has improved, yet consumers are paying more—not because of market forces, but because of policy failures, faulty contracts, and unchecked inefficiencies.
For years, petroleum was the undisputed heavyweight in Pakistan’s taxation structure. That’s no longer the case. With GST on petrol and HSD scrapped in favor of the Petroleum Levy (PL), the share of petroleum in domestic GST has crashed from 47 percent a decade ago to just 8 percent today—a near-perfect inverse of electricity taxation’s trajectory.
Yet, the total tax incidence on transport fuels and electricity now stands at nearly the same level—Rs1-1.1 trillion per year. Global data from the World Bank suggests that two-thirds of energy tax revenues in most countries come from transport fuels. But Pakistan runs one of the highest post-tax subsidies on transport fuels among non-OECD countries—an inefficient policy that ignores the environmental and economic costs of fuel consumption. Meanwhile, electricity taxes keep climbing, not due to externalities, but because of policy mismanagement.
Amidst the usual suspects, one new entrant has shaken up the rankings in import-stage GST: PV semiconductors. Once a minor player, PV semiconductor taxation has exploded, reaching nearly Rs100 billion in just 1HFY25—now the second-largest contributor to import-stage GST.
A decade ago, its share was under 0.5 percent. Today, it’s touching 10 percent, mirroring the decline of electrical machinery, which has collapsed from 8 percent to less than 0.5 percent. This is proof that the solar revolution is unfolding in Pakistan and not quietly. But while the sector booms, policy gaps remain. From demand forecasting to consumer pricing, Pakistan’s electricity sector planning is still playing catch-up. The FBR data isn’t just a report—it’s a warning sign and an opportunity.
Taxation equity in Pakistan has been an afterthought, but it doesn’t have to stay that way. The salaried class can’t continue bearing a disproportionate burden. Energy pricing must reflect economic realities, not just revenue targets. And if the solar revolution is here, policies need to enable it, not stifle it.
The FBR data offers a rare glimpse into Pakistan’s economic trajectory. The question is: will anyone act on it?
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