Tax shortfall

The Rs116 billion shortfall is a cause for concern for the common man on how the government is going to bridge the gap

Under Shabbar Zaidi, the FBR is doing a good job, but not good enough to satisfy the IMF. Tax collection in the first quarter of the ongoing fiscal year is 13.5% higher on a year-on-year basis. The figure, however, has fallen short of the IMF expectations. As agreed with the global lender for the sake of securing the $6 billion loan facility, the PTI government was to collect Rs1,071 billion in the first three months of FY2019-20, with the target for the full year being Rs5,550 billion. But as per the provisional estimates, the government could only manage Rs955 billion tax revenue in the July-September quarter which means a shortfall of Rs116 billion or nearly 10 per cent of the target. The tax collection would have dipped to Rs910 billion — i.e. a shortfall higher by Rs45 billion — had the FBR not held back on the tax refunds and cleared the whole of Rs75 billion as committed.

The Rs116 billion shortfall is a cause for concern for the common man on how the government is going to bridge up the gap. There are apprehensions of a minibudget or a cut in development spending. However, neither option is digestible for a people already heavily taxed — both directly and indirectly — and bearing with a growth rate has fallen below 3 per cent, translating mainly into job cuts. This takes us back to a time when Asad Umar had been negotiating with the IMF for a bailout package. The then the foreign minister would strongly insist that the IMF bailout programme would not burden the common man. Will the government now choose some ‘uncommon’ men to impose taxes on in order to make up for the tax shortfall?

Going by this rate — Rs116 billion for a quarter — the shortfall for the full fiscal comes to something around Rs450 billion. Instead of squeezing the common man further, the government must look for avenues for raising non-tax revenues. Privatisation of sick industrial units is not a bad option.

Published in The Express Tribune, October 3^rd, 2019.

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