Despite 18% growth, FBR falls Rs99 billion short of revenue target

Collection stands at Rs2.26 trillion for first eight months of fiscal year

Shahbaz Rana March 01, 2018
Collection stands at Rs2.26 trillion for first eight months of fiscal year. PHOTO: BLOOMBERG

ISLAMABAD: The government has provisionally collected Rs2.26 trillion in revenue during the first eight months of the current fiscal year, an amount higher by 17.7%, but significantly short of the target.

From July through February of this fiscal year, the Federal Board of Revenue (FBR) recorded a provisional net revenue collection of over Rs2.259 trillion as against Rs1.920 trillion during the same period of the previous fiscal year, according to an official handout. The FBR said that the provisional collection excluded book adjustments.

“The FBR has recorded an increase of around 17.65% or Rs339 billion in collection over the amount during the corresponding period last fiscal year,” it added.

Reforming tax structure should be priority

Provisional collection for February 2018 was Rs263 billion, excluding collection on account of book adjustments, as against Rs227.5 billion during February 2017. Monthly collection was up by 15.6% or Rs35.5 billion.

The FBR said that the amount of monthly collection was encouraging. The collection received in treasuries of remote areas may further increase revenue figures, it added.  The FBR said that the government has fixed the full-year target with an annual increase of around 19%.

However, the FBR’s collection has fallen below 19% for the second successive month despite the tax machinery collecting 25.5% general sales tax (GST) rate on high-speed diesel - way higher than the 17% standard GST rate. The government also increased the price of petroleum products for the seventh consecutive month.

Parliament has approved a Rs4.013-trillion tax collection target that requires 19.2% growth rate. For the first eight months (July-February) of the fiscal year, the FBR had set a target of Rs2.358 trillion. The shortfall in tax collection during the first eight months has widened to Rs99 billion.

The latest results have reduced hopes of achieving the annual tax collection and fiscal deficit targets. The Rs2.263-trillion collection in the first eight months was 56.4% of the annual target. The FBR was required to achieve at least 58.8% of the annual target in the first eight months, according to the Ministry of Finance officials.

The FBR is struggling to enhance its revenue despite availing the bonanza of high regulatory duties and rupee devaluation that has increased the collection of taxes at the import stage. According to FBR’s estimates, about 5.2% devaluation of rupee against the US dollar would give it an extra benefit of minimum Rs55 billion.

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The FBR is also struggling to improve the narrow tax base, as despite numerous extensions, the number of income tax return filers remained at 1.238 million persons by February 15. The number of income tax return filers from all major sectors of the economy has actually shrunk in the last five years and it is only the salaried class that is proving to be a saving grace for the government.

Total income tax return filers stood at 1.391 million filers in tax year 2016. This shows that about 152,789 people have skipped from the FBR’s already narrow tax base. These numbers are inclusive of the salaried class.

After excluding the categories of salaried and ‘others’, there were more income tax return filers in tax year 2013 than in 2017.

Published in The Express Tribune, March 1st, 2018.

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