FBR faces first tax shortfall of FY27

Collects Rs4.06 trillion in July-October, misses target by Rs124 billion

ISLAMABAD:

The Federal Board of Revenue (FBR) collected Rs4.06 trillion in taxes during the first four months of the current fiscal year, facing a shortfall of Rs124 billion but clinging to hopes that it would receive a few more billions along with tax returns on Saturday.

The July-October collection results have been closely watched that came on the heels of two unusual developments – the government's proposal to establish a new tax agency, which it later shelved, and adverse action against office-bearers of the Inland Revenue Service Officers Association for threatening to observe a pen-down strike.

By the last official working day of the month, Friday, the FBR could bag Rs4.06 trillion for the July-October period of the current fiscal year despite setting a relatively low target, according to provisional figures compiled till late in the evening.

The collection was a mere Rs220 billion, or nearly 6%, higher than the last fiscal year but was far lower than the 17% pace needed to achieve the annual target.

For October, tax receipts remained at Rs974 billion, falling short of the target of Rs1.132 trillion by Rs158 billion. The increase in the monthly collection was only Rs23 billion, or 2.5%, compared to a year ago.

However, the tax authorities were hopeful that they could receive Rs20 billion to Rs25 billion along with income tax returns on October 31, the last day of the twice extended deadline for filing returns. The taxes paid along with returns were not portraying a healthy trend, although the number of returns was higher.

As of October 28, compared to the Rs88.5 billion income tax paid along with returns last year, the tax department received Rs85.2 billion this year. Authorities were hopeful that the figure would cross Rs100 billion by late Saturday evening. This will lower the tax shortfall but will not eliminate it.

A few days ago, the government had discussed the idea of either establishing a new tax agency or outsourcing the functions of the FBR. After coming to know about the government's plans, the IRS Officers Association threatened to stage a pen-down strike. The association withdrew from its threat following assurance from the FBR member operations that no adverse action would be taken against them.

However, the FBR suspended two officers and posted another seven in Khyber-Pakhtunkhwa and Balochistan on suspicion that they were behind the pen-down strike move. The association president escaped suspension or being deputed in a province.

Tax collection

The FBR got Rs4.06 trillion in taxes during July-October of the current fiscal year, missing the target by Rs124 billion. There was a slim growth of 6%, or Rs220 billion, over the same period of last fiscal year. The numbers will improve after more payments are received along with tax returns in the next 24 hours, in addition to import taxes.

For the current fiscal year, the government and the IMF have given a Rs15.263 trillion annual tax target to the FBR. This requires a 17.4% growth over last year's collection. Unlike in the past, the IMF has made it binding to meet tax goals and the approval of the sixth loan tranche would be contingent upon achieving the first-half target.

However, sources said that the FBR's internal assessment indicated that it would be able to hit Rs14.3 to Rs14.6 trillion by the end of the current fiscal year in June 2027, thus there would be a shortfall.

According to the provisional figures, the revenue board received Rs1.85 trillion in income tax, missing the four-month target by Rs165 billion. For the fourth consecutive month, sales tax collection remained higher than the target. The FBR got Rs1.515 trillion worth of sales tax, exceeding the target by Rs67 billion. Four-month sales tax receipts were higher by Rs155 billion, or 11.3%.

Federal excise duty collection stood at Rs277 billion, almost equal to the target as it grew only 6.5%. Customs duty payments reached Rs424 billion, which was Rs25 billion lower than the target and almost at last year's level with no growth.