FBR beats Jul-Feb tax target
TRIBUNE: CREATIVE
The Federal Board of Revenue (FBR) exceeded its eight-month tax collection target by Rs268 billion but narrowly avoided missing the monthly target for the third month in a row after slowing down disbursement of taxpayers’ refunds.
Against the original but relatively low tax target of nearly Rs3.53 trillion, the FBR provisionally collected nearly Rs3.8 trillion during the July-February period of current fiscal year, according to an FBR’s statement.
The collection was Rs884 billion, or slightly over 30%, higher compared to the collection of Rs2.9 trillion in the same period of previous year, according to the FBR.
However, the FBR’s performance was once again largely dependent on imports that contributed nearly 53% to the total collection, which helped camouflage the weaknesses in domestic sales tax collection.
The FBR said that it paid Rs197 billion in tax refunds, against Rs157 billion in the same period of previous fiscal year.
However, it paid Rs8.2 billion, or 35%, less refunds in February after the tax department saw that it was going to miss the monthly target for the third consecutive month.
The FBR paid Rs15.3 billion in tax refunds in February 2022, against Rs23.5 billion in the same month a year ago.
It helped the tax machinery to show Rs443.5 billion collection in February, hardly Rs1.5 billion higher than the target.
FBR Chairman Dr Mohammad Ashfaq did not respond to the question whether the release of refunds slowed down to avoid missing the monthly target.
After assuming the responsibility, Ashfaq had promised that he would neither take advance taxes nor block refunds to achieve the targets.
For the last two months, the FBR had missed its monthly targets, although its overall collection was higher than the original target.
The FBR has not revised upwards its monthly targets so far despite imposing 17% sales tax on almost every consumable item.
Under a deal with the International Monetary Fund (IMF), the current annual tax collection target of Rs5.829 trillion will go up to Rs6.1 trillion, which requires changes to the monthly targets.
In case it revises targets for the remaining four months of the current fiscal year, the task will become more uphill after slowdown in imports - a main source of FBR’s tax collection.
Year-to-date performance
There was no change in the contribution of various taxes to the total tax collection and indirect taxes remained a predominant source of revenue generation despite Prime Minister Imran Khan’s focus on widening the tax base.
Overall, FBR collected 65%, or Rs2.48 trillion, in indirect taxes - general sales tax, customs duty and federal excise duty, which were the three main sources of indirect taxes. Similarly, Rs2 trillion, or 52.5%, of the total collection was at the import stage.
FBR collected Rs1.32 trillion in income tax in the first eight months of the current fiscal year, up Rs265 billion, or one-fourth, over the same period of previous year. Over Rs188 billion worth of income tax was collected at the import stage.
The share of income tax in total revenue stood below 35%, which placed increased burden on people who had lower payment capacity.
FBR recorded 35% growth in sales tax collection in the July-February period due to heavy reliance on import taxes. It collected Rs1.66 trillion in sales tax, up Rs427 billion.
The total increase in sales tax collection was once again lower than the jump in sales tax receipts at the import stage due to negative growth in domestic sales tax collection.
FBR collected Rs487 billion in domestic sales tax compared with Rs528 billion in the previous year, a dip of 7.8%. Contrary to that, sales tax collection at the import stage stood at Rs1.17 trillion in the first eight months of the current fiscal year as against Rs703 billion in the previous year. There was an increase of Rs469 billion, or 67%, in sales tax collection at the import stage.
As compared with the target, the total sales tax collection was higher by Rs203 billion, thanks to higher imports. Federal excise duty collection amounted to Rs197 billion, which was higher by Rs24 billion than the corresponding period of previous year.
Customs duty collection increased to Rs622 billion, higher by Rs169 billion, or 37%. It was Rs59 billion more than the target.
Published in The Express Tribune, March 1st, 2022.
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