FBR eclipses quarterly tax target

Collects Rs1.635tr against target of Rs1.61tr; Dar extends return filing date


Shahbaz Rana October 01, 2022
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. photo: file

ISLAMABAD:

The Federal Board of Revenue (FBR) surpassed its quarterly tax target of Rs1.61 trillion despite legal challenges, but could receive only 1.8 million income tax returns – half of the statements filed last year – in spite of engaging celebrities in a campaign.

Against the July-September target of Rs1.61 trillion, the revenue board provisionally collected Rs1.635 trillion, surpassing the goal by Rs26 billion, Finance Minister Ishaq Dar announced at a late-night press conference.

The minister also announced a one-month extension in the filing of income tax returns that remained below last year’s total returns of 3.6 million.

Compared to the same period of last fiscal year, the tax collection stood higher by nearly 17%, or Rs239 billion, a pace that was lower than the prevailing inflation rate of 27% but sufficient to keep the tax department on track.

During the first quarter of previous fiscal year, the FBR had got Rs1.4 trillion. Surpassing the quarterly target has stopped triggering the contingency measures agreed with the International Monetary Fund (IMF) in case the country misses the target.

The tax collection in relation to quarterly and monthly targets remained in order in September, said Dar. “The FBR has achieved the monthly target of Rs685 billion,” he added.

The minister said that the FBR paid Rs84 billion in tax refunds in three months, higher by Rs22 billion than the previous year.

Dar also announced an extension of one month to October 31 in the statutory deadline for filing the income tax returns. “There are long queues of taxpayers, who still want to submit returns and the system is choked,” he said, adding that there were also genuine requests by various tax bars, which wanted the extension in the last date due to the situation caused by the floods.

He appealed to the people to avail themselves of the opportunity and fulfil their national obligation by filing the returns.

So far, about 1.8 million individuals, Associations of Persons (AOPs) and companies have filed the annual tax returns, constituting hardly 50% of the taxpayers who submitted the returns during the last tax year – 2021.

In the category of individuals, the FBR has so far received 1.75 million tax returns, which account for 50% of the return filers last year.

Despite engaging the celebrities to convince people to fulfil the national obligation, the FBR has failed to achieve the desired results.

The return filing was also affected by the legal challenges that the FBR faced due to lacunas in taxation policies. The Lahore High Court (LHC) on Thursday conditionally suspended up to 10% super tax on companies whose accounting year closed in December last year, but were required to pay the tax.

During the current week, the LHC also permitted the real estate sector to seek an extension in the filing of annual income tax returns, if it was aggrieved by the 20% deemed income tax.

Similarly, the Sindh High Court last week allowed banks to file annual income tax returns on the basis of old advance-to-deposit ratio (ADR). The FBR had taken those three measures in the budget to raise a cumulative Rs125 billion in additional taxes.

Tax authorities need to collect Rs7.470 trillion in the current fiscal year, which requires 21% growth over taxes received in the previous year.

However, there were some worrying signs as the collection of customs duty, which in the past was a cornerstone of the FBR’s performance, remained below the target for the third 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 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.

Provisional collection figures showed that the FBR collected Rs683 billion in income tax, up Rs202 billion, or 42%, which was a healthy sign for the tax system.

The collection was equal to 42% of the total taxes received in the first three months of FY23. The FBR beat the three-month income tax target by Rs47 billion.

Sales tax collection finally showed a nominal positive growth of 3%. The FBR collected around Rs642 billion in sales tax, up Rs17 billion over the same period of last year.

Federal excise duty collection stood at nearly Rs80 billion, up Rs9 billion, or 13%. It exceeded the target by Rs5 billion.

However, the customs duty collection remained challenging. The collection under the head stood at Rs225 billion – Rs27 billion short of target. But it was Rs6 billion more than the previous fiscal year.

A key reason was the reduction in imports, which the government was containing to curb the current account deficit.

Published in The Express Tribune, October 1st, 2022.

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