FBR misses March tax target

Claims higher collection than receipts in banking system in July-March

ISLAMABAD:

The Federal Board of Revenue (FBR) claimed on Thursday that it collected Rs4.382 trillion in taxes during the first nine months of current fiscal year but again missed the monthly target by a wide margin due to its failure to increase reliance on direct taxes.

According to the provisional information, the FBR received Rs4.382 trillion during July-March of current financial year 2021-22, showing an increase of 29% over the collection made during the same period of previous fiscal year, according to an FBR statement.

However, sources said that till late Thursday night, the provisional collection stood at Rs4.368 trillion – Rs14 billion less than what the FBR claimed in its press release.

They said that the number might jump above Rs4.38 trillion once the provisional figures were finalised including the book adjustments.

The FBR has seized the bank accounts of National Highway Authority and withdrew Rs1.2 billion to recover taxes. This will increase the overall collection by the same amount.

However, it is for the first time that the FBR has claimed higher collection in the press release than the taxes received in the banking system at the time of issuing the statement.

The FBR’s performance was once again largely dependent on imports that contributed nearly 52% to the total tax collection, which again camouflaged the weaknesses in the domestic sales tax collection that remained negative.

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During the current fiscal year, the FBR collected on average Rs16.2 billion per day but now it needs to increase the pace to Rs19 billion daily to achieve the annual target of Rs6.1 trillion.

The task could become difficult after the FBR missed the monthly target by a wide margin of Rs29 billion, according to the provisional results. Against the monthly target of Rs604 billion, the tax collection stood at Rs575 billion in March, according to the FBR. But it was still over 20% higher than the collection in the same month of last fiscal year, thanks to the heavy reliance on indirect taxes.

Going by the actual money received by the FBR till late Thursday, the monthly collection was Rs43 billion less than the target.

The FBR has missed its monthly targets in three out of the past four months. The government has already revised the FBR’s annual target from Rs5.829 trillion to Rs6.1 trillion under a deal with the International Monetary Fund (IMF). Tax authorities now need to generate Rs1.72 trillion in the last quarter of current fiscal year, which might be challenging after the government lowered taxes on petroleum products and imports also slowed down.

The FBR said that it paid Rs31.9 billion in refunds in March while the total refund payments during the current fiscal year amounted to Rs229 billion, showing an increase of 25%.

The FBR did not pay any penny in income tax refunds during the past two months.

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Sources said that in case the no-confidence motion succeeded against Prime Minister Imran Khan, the new government may replace the FBR chairman. The next economic team was currently considering various names for the post of FBR chairman, they added.

Year-to-date performance

Overall, FBR collected 64%, or Rs2.8 trillion, in indirect taxes - general sales tax, customs duty and federal excise duty, which were the three main sources of indirect taxes. Similarly, Rs2.25 trillion, or 52%, of the total collection was at the import stage.

The FBR collected Rs1.57 trillion in income tax in the first nine months of the current fiscal year, up Rs327 billion, or 26%, over the same period of previous year. Over Rs212 billion worth of income tax was collected at the import stage. The share of income tax in total revenue stood at 36%.

The FBR recorded 31% growth in sales tax collection in the July-March period due to heavy reliance on import taxes. It collected Rs1.86 trillion in sales tax, up Rs440 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.

The FBR collected Rs545 billion in domestic sales tax compared with Rs600 billion in the previous year, a dip of 4.2%. Contrary to that, sales tax collection at the import stage stood at Rs1.31 trillion in the first nine months of the current fiscal year as against Rs820 billion in the previous year. There was an increase of Rs495 billion, or 60%, in sales tax collection at the import stage.

The FBR has missed the monthly sales tax target by Rs43 billion despite bringing in a mini budget in January that imposed a 17% tax on almost every important item being sold in the country.

Federal excise duty collection amounted to Rs225 billion, which was higher by Rs30 billion than the corresponding period of previous year.

Customs duty collection increased to Rs708 billion, higher by Rs179 billion, or 33%. But the customs department missed the monthly target by Rs15 billion after the pace of increase in imports slowed down.

In its statement, the FBR said that for the first time ever in the country’s history, sales tax on all POL products has been reduced to zero which cost FBR Rs45 billion in March 2022. Likewise, the revenue impact of sales tax exemptions provided to fertilizers, pesticides, tractors, vehicles, and oil and ghee come to Rs18 billion per month.

Published in The Express Tribune, April 1^st, 2022.

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