Despite a sluggish economic growth and import compression, the Federal Board of Revenue (FBR) surpassed its five-month tax collection target of nearly Rs2.7 trillion on the back of enforcement measures and steady income tax growth.
However, the income tax return filing still remained a big challenge for the revenue board during July-November of current fiscal year.
“The FBR continues to demonstrate excellent performance in revenue collection for the fifth consecutive month of current financial year and has exceeded both the five-month target of Rs2.68 trillion as well as monthly target of Rs537 billion,” said a statement issued by the FBR.
It added that both the targets had been achieved despite import compression and zero sales tax on petroleum products. The economy is projected to grow only 2% but inflation is hovering around 27%, playing a key role in enhanced tax collection after income tax receipts.
As per provisional figures, Rs2.69 trillion was collected against Rs2.33 trillion in the corresponding period of previous year, an increase of over 15.3%, according to the FBR. But the growth was below the prevailing 27% inflation, which the FBR needs to address.
The FBR has also issued refunds to the tune of Rs135 billion against Rs124 billion last year.
The provisional tax collection for November 2022 came in at Rs538 billion, which showed an increase
of 11.5% over the collection of Rs480 billion in November 2021, according to the FBR.
The FBR acknowledged the efforts of field formations and tax officers “to optimise revenue collection in difficult times where sales tax collection on imports is showing a negative growth,” said the statement.
Achievement of targets was made possible due to the extraordinary steps taken in the areas of recovery, monitoring and day-to-day vigilance, it added.
Only in the area of income tax arrears, the FBR collected Rs24.2 billion during the five-month period against Rs11.7 billion last year. During November, Rs9 billion was collected against Rs6.7 billion last
year through the enforcement measures, according to the FBR.
The Large Taxpayer Office, Islamabad has managed to recover arrears from the oil and telecommunication sectors, which helped achieve the monthly target as without those measures it was falling short of the goal.
However, the tax returns filing again stood low at 2.86 million compared to 3.8 million in the previous tax year, showing a reduction of 23%.
Finance Minister Ishaq Dar, for the third time, extended the date of filing returns by 15 days. The new deadline is December 15.
The FBR had been against further increasing the date of return filing and wanted to take enforcement
measures against the non-filers of income tax returns.
“The revenue collection trend in the first five months augurs well for the achievement of the assigned revenue targets for the current financial year,” said the FBR.
However, sources said that achieving the Rs965 billion tax target for December was next to impossible. They said that the target had been set on the assumption that the additional income taxes imposed on banks and real estate would contribute Rs260 billion in the month. But those taxes could not withstand the courts’ scrutiny.
Tax authorities need to collect Rs7.470 trillion in the current fiscal year, which requires 21% growth over taxes received in the previous year.
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.
Recently, the IMF asked Pakistan to impose Rs600 billion in new taxes to reach 9.5% tax-to-GDP ratio. Possible shortfall in the coming months may expose the government to more pressure from the IMF.
The collection of customs duty, which in the past was a cornerstone of the FBR’s performance, remained below target for the fifth consecutive month. The FBR collected Rs382 billion in customs duty, which was even lower than last year’s level.
It was mainly due to the restrictions imposed on imports, which contracted 20% in Jul-Nov FY23.
A major achievement was on the income tax side. The income tax collection in five months amounted to Rs1.1 trillion, up by Rs333 billion or 43%.
Sales tax collection increased to only Rs1.065 trillion, higher by a mere Rs17 billion or 1.7%. Sales tax at the domestic stage stood at Rs379 billion, higher by 21%. But on imports, the sales tax dropped to Rs687 billion, a reduction of 7% or Rs49 billion. Two-thirds of the total sales tax was collected at the import stage.
The share in total taxes at the import stage has dropped below 45% to Rs1.2 trillion, due to increase in income tax collection and contraction in imports.
Federal excise duty collection amounted to Rs136 billion, up Rs15 billion or 12%.
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