FBR exceeds tax target, avoids mini budget
PHOTO: FILE
The Federal Board of Revenue (FBR) has surpassed the revenue collection target for the fifth consecutive month, amassing nearly Rs3.5 trillion, remaining on track to achieve the goal set by the International Monetary Fund (IMF) and avoiding the need for a mini-budget.
The tax authorities collected Rs34 billion more than the target set for the July-November period of this fiscal year on the back of an exceptionally healthy increase in direct taxes. It was the fifth consecutive month that the FBR has exceeded its monthly target, although the goal was steeper in November.
The growth in revenue collection was also nearly 30%, beating the inflation rate, but the GST collection was not as high as it should have been. Against the July-November target of Rs3.45 trillion, the FBR provisionally collected Rs3.84 trillion, according to FBR officials. Tax receipts were Rs34 billion higher than the five-month target, helping avoid any pressure from the IMF for a mini-budget.
According to an understanding reached with the IMF, the FBR would monthly intimate the global lender about progress in its revenue collection. In case of a revenue shortfall in any month, the FBR would trigger back-up measures that include the imposition of excise duties and withdrawing sales tax exemptions.
An IMF technical mission is already in town for a two-week review of the country’s taxation system. The FBR achieved close to 30% growth in tax collection and got Rs791 billion more than the last fiscal year. During the first five months of the previous year, it had received revenues of nearly Rs2.7 trillion.
Low tax collection has remained a chronic issue as taxation has skewed towards the indirect mode, hurting poor people the most. The trend has started reversing, with the share of direct taxes increasing to 45% during the first five months, thanks to better collection from real estate and commercial banks.
The FBR chairman said that import restrictions also helped lower the share of import taxes and correct the share of direct taxes in overall revenue generation efforts.
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The share of import taxes, which was once equal to 53% of the total tax collection, has now dropped below 40%, thanks to restrictions on imports to preserve the precarious reserves of $7.2 billion.
Despite imposing heavy taxes in the last fiscal year, the FBR collected Rs7.164 trillion, hardly equal to 8.6% of the national economy. One reason for the low collection was the political patronage of tax-evading sectors like real estate, traders, stock market, and exporters.
For the current fiscal year, Pakistan has agreed with the IMF that it will strive to collect Rs9.415 trillion in taxes. The FBR did not change the revenue target, nor did it recommend a mini-budget during the recently concluded first review talks. Out of the four types of taxes – income tax, sales tax, federal excise duty (FED), and customs duty, the FBR met only income tax and FED targets.
Income tax collection amounted to nearly Rs1.57 trillion, up Rs463 billion, or 42%, during the first five months of the current fiscal year. Income tax collection was about Rs221 billion more than the target, offsetting the impact of missed sales tax and customs duty targets.
Sales tax remained the weakest area as its collection reached Rs1.255 trillion, which was Rs186 billion, or 17%, more than the last fiscal year. But the amount was Rs95 billion less than the target due to low growth in tax receipts at the import stage. Still, the FBR collected 61% of its sales tax or Rs770 billion at the import stage.
The FBR collected Rs222 billion in FED with 63% growth. It was Rs17 billion more than the five-month target. The collection of customs duty stood below the target by Rs114 billion.
Published in The Express Tribune, December 1st, 2023.
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