FBR eclipses tax target
photo: file
The Federal Board of Revenue (FBR) has topped its tax target by collecting over Rs948 billion in the first two months of current fiscal year amid the challenge of maintaining the momentum as imports and economic activities are slowing down in the aftermath of the devastating floods.
Against the July-August target of Rs926 billion, the revenue board provisionally collected Rs948 billion, surpassing the goal by Rs22 billion. The additional tax receipts may help the FBR to achieve the new month’s target, which is relatively higher. Compared to the same period of last fiscal year, the tax collection was higher by nearly 10%, or Rs83 billion – a pace that was significantly lower than the prevailing inflation rate of 25%.
Tax authorities need to collect Rs7.470 trillion in the current fiscal year, which requires 21% growth over taxes received in the previous fiscal year. For August, the revenue board had set a target of Rs483 billion, which it surpassed by a slight margin on the back of nearly 9% growth.
However, there are some worrying signs as the collection of customs duty, which in the past remained a cornerstone of the FBR’s performance, remained below the target for the second consecutive month. Economic activities in the country have been temporarily affected by the floods, which will dent the FBR’s tax receipts under various categories.
The country may see a pickup in imports in the coming months but a significant chunk of the imports could be free of duties and taxes.
In order to alleviate the sufferings of people due to the unprecedented devastation caused by recent floods, the prime minister has ordered urgent relief measures to ensure uninterrupted supply of relief goods to the people of affected areas, said the FBR on Wednesday.
The FBR this week exempted from all duties and taxes the import of goods needed for relief operations in the flood-stricken areas. Such imports will be duty and tax-free following certification by the NDMA or PDMA. Goods being sent as donations by foreign governments or international organisations and donors are also exempted from customs duty and taxes, according to notifications.
Taxes have been waived for a period of three months, showed the notifications. The FBR said that the elimination of all taxes and duties on the procurement of relief goods would help ensure maximum use of resources to lessen the hardships being faced by the affected people.
In the FY23 budget, the government has imposed over Rs1 trillion in additional taxes on account of petroleum levy, income tax, sales tax and federal excise duty.
The provisional collection figures showed that the FBR collected Rs343 billion in income tax, up Rs83 billion, or 31%. The collection was equal to 36% of the total taxes received in the first two months of FY23. The FBR beat the two-month income tax target by Rs27 billion.
Of the Rs948 billion total tax collection in July and August, the FBR generated taxes of Rs486 billion at the import stage in terms of withholding taxes, sales tax on imports and customs duty. Its share came in at around 51%, picking up pace again after slowing down in July.
The FBR’s sales tax collection showed a negative growth of 3% for the second consecutive month despite a high inflation rate of 25% in Pakistan. It collected around Rs407 billion in sales taxes, down Rs9 billion over the same period of last year.
The FBR collected around Rs120 billion in domestic sales tax compared with Rs138 billion in the previous year, a decrease of Rs18 billion, or around 13%.
One of the reasons for the decline in sales tax receipts is that the government has abolished GST on petroleum products and has replaced it with a very high petroleum levy.
GST collection is shared with provinces but the petroleum levy fully remains in the hands of federal government. Sales tax collection at the import stage stood at Rs285 billion, which was Rs7 billion more than last year’s collection.
The government has posted Amjad Zubair Tiwana as new member of the Inland Revenue Operations, who has good experience of the field as well as tax policy and is capable of improving the tax numbers.
Federal excise duty collection stood at nearly Rs51 billion, up Rs5 billion, or 11%. It exceeded the target by Rs10 billion.
However, the customs duty collection remained a problematic area. The collection under this head stood at Rs149 billion – Rs14 billion short of target. It was also Rs6 billion less than the previous fiscal year. A key reason was the reduction in imports, which the government was containing to reduce the current account deficit.
Published in The Express Tribune, September 1st, 2022.
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