Govt surpasses Rs6.7tr tax target

In Local
April 01, 2024


The government has exceeded its nine-month tax collection target of over Rs6.7 trillion for this fiscal year on the back of sustained growth of income taxes, reducing the country’s reliance on regressive and inflationary indirect taxation.

Where the Federal Board of Revenue (FBR) achieved its target for the period of July-March of the current fiscal year, it also substantially increased the share of the income taxes to nearly half of the total money it racked up.

The FBR further managed to achieve the monthly target of Rs879 billion for the first time in the past two months.

For March, the government had set the tax target at Rs879 billion while the nine-month (July-March) goal was Rs6.707 trillion.

According to provisional figures, the FBR collected Rs6.71 trillion during the nine months of this fiscal year.

The collection was 30% or Rs1.55 trillion more than the amount accrued during the same period of the last fiscal year.

The FBR’s decision to attach the bank accounts of the Civil Aviation Authority (CAA) to recover taxes worth Rs12.7 billion helped it in crossing the nine-month threshold.

On Friday, The Express Tribune reported that the country had granted Rs50 billion in annual income tax exemption to two government departments in violation of the International Monetary Fund (IMF) programme and its own taxation law.

However, the FBR did not accept the exemption and went ahead with its plan to recover the amount.
Pakistan has agreed with the IMF that it would not grant any income tax exemption.

The government may have to amend its laws to withdraw the income tax exemption given to the CAA and Pakistan Airports Authority.

Pakistan is gradually heading towards achieving economic stabilisation but it needs intensive efforts to deepen this steadiness by undertaking critical taxation, expenditure and external sector reforms.

The wholesale, retail, construction and agricultural sectors remain the weakest areas in terms of tax collection.

The IMF is expected to bring these areas on the radar in the next bailout programme as there is a resistance to impose any further taxes on the salaried class and corporate sector.

Prime Minister Shehbaz Sharif has also instructed the FBR not to withhold tax refunds to inflate the revenues.

This led to a significant increase in the payment of refunds by the FBR in March.

The FBR gave Rs369 billion in tax refunds in nine months — 45% more than the amount during the corresponding period in the last fiscal year.

In March alone, the FBR released refunds of Rs67 billion against just Rs21 billion in the same month last year.

The FBR collected Rs3.27 trillion under the head of income tax in the nine months, exceeding the target by Rs568 billion.

The growth in income tax was 41% over the same period in the last fiscal year.

The share of the income tax in the overall taxation is now nearly 50%, marking a shift in the policy of dependency on indirect taxes.

A key factor behind the higher collection of income taxes is greater collection from the banks.

The banks’ profitability has increased because of the record interest rate at 22%.

The FBR collected Rs2.24 trillion in sales taxes — higher by Rs335 billion or 18% against the same period of the last fiscal year.

However, the growth is far lower than the prevailing inflation rate, indicating leakages in the collection.

The FBR missed the sales tax target by a wide margin of Rs393 billion and it needs to focus on strengthening its capacity in this area.

The government has launched various initiatives to capture the true sales of businesses but all those measures have failed to yield the desired results.

The federal excise duty (FED) collection amounted to Rs402 billion –higher by 62% over the same period of the last fiscal year. However, the FBR missed the nine-month target by Rs19 billion.

One of the main factors behind the increased collection is the higher FED rates, particularly being charged on tobacco and cement.

The FBR again missed the custom duties collection target by a margin of Rs153 billion.

It collected Rs809 billion in the nine months, which was 16% more against the corresponding period last year.

The custom duties tax target was set on the basis of monthly $5 billion imports.

However, the imports remained on an average at around $4.5 billion because of the external sector problems and slowing wheel of the economy.

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