ISLAMABAD:
The Federal Board of Revenue (FBR) has so far faced a Rs65 billion revenue shortfall, which authorities attributed to a drop in electricity consumption from the national grid and an industrial slowdown, underpinning challenges caused by weak tax collection and the reversal of enforcement measures.
Against the target of Rs1.7 trillion, the FBR collected Rs1.635 trillion till the last working day of the month, according to provisional figures. A senior FBR official said the collection would improve once final figures were compiled, reducing the shortfall to around Rs45-50 billion.
The collection was Rs190 billion, or nearly 13% higher than last fiscal year, but the pace remained below requirements. The final growth figure may hover around 15%.
The slow momentum in the opening months of the fiscal year may further complicate matters for the FBR, which last year missed its annual target by a wide margin of Rs1.2 trillion.
The FBR has once again missed its target ahead of the International Monetary Fund (IMF)’s scheduled visit in the third week of September for the second review of Pakistan’s economy. The IMF will review programme implementation up to June this year, but the government’s performance in the first quarter of the current fiscal year will also come under discussion. The FBR remains a weak link in this equation.
Tax authorities said that compared to Rs125 billion collected through electricity bills in the last fiscal year, this year’s figure fell to Rs86 billion, becoming a major reason for the shortfall. Industrial production has also failed to pick up, affecting revenue collection.
The government has set an annual revenue target of Rs14.13 trillion for the current fiscal year, requiring a 20% increase over last year. The FBR had banked on stronger enforcement measures and recovery of taxes tied up in litigation.
But setbacks emerged last month when the FBR accepted traders’ cash deposits in banks as banking transactions. It also delayed implementing the ban on major purchases by individuals without declared assets, despite laws requiring asset declarations for buying vehicles or property.
Finance Minister Muhammad Aurangzeb had warned in his post-budget press conference that if Parliament did not approve enforcement measures, the government might be forced to take additional revenue steps worth Rs400-500 billion. Although Parliament approved the government’s proposals with minor adjustments, they were subsequently reversed after the business community took to the streets.
The government has assigned three key roles to Dr Hamid Ateeq Sarwar, who retired from service last month but was rehired on a one-year contract. He now serves as member strategic transformation, member inland revenues operations, and acting chief executive officer of Pakistan Revenue Automation Limited. The inland revenue division is responsible for nearly 80% of total tax collection.
Tax authorities collected Rs695 billion in income tax, meeting their two-month target. Sales tax collection reached Rs625 billion, around Rs65 billion short of target.
Federal excise duty collection amounted to Rs113 billion but remained slightly under target. Officials said higher duty rates on several goods, including beverages, hurt company sales and reduced excise revenues.
Customs duty collection, however, rose to Rs200 billion, exceeding the monthly target. This was partly due to clearance of pending cargoes, held back by importers anticipating reduced duties. Customs duty collection is tied directly to import volumes, which depend on foreign currency availability.
Imports are expected to gain momentum as the government gradually opens the economy to foreign competition by lowering import taxes.
Last week, the government transferred the member customs operations, days after his posting. Shakil Shah, previously serving as additional secretary in the Prime Minister’s Office, has now been appointed member customs. He is expected to provide critical support to the service.
The FBR also missed its monthly target of Rs951 billion, collecting Rs887 billion till Friday evening. Monthly growth remained at just 12%, which officials admitted was concerning despite lower refund payments.
Compared to Rs53 billion in refunds issued in August last year, the FBR cleared only Rs37 billion this August. For July-August, cumulative refunds stood at Rs118 billion — Rs14 billion, or nearly 11%, less than the previous fiscal year.
