The Federal Board of Revenue (FBR) collected Rs1.722 trillion in taxes during July-August, meeting its target for the first two months of the current fiscal year, but overall growth remained well below the pace required to achieve the annual revenue goal.
According to provisional figures, tax collection increased by Rs55 billion, or 3.3 percent, compared with the same period last year. The FBR’s two-month collection was Rs12 billion above the target, while the annual target requires revenue growth of 17.4 percent.
The FBR’s performance was supported by higher sales tax collection, which remained above its target for the second consecutive month. However, income tax receipts fell below the target and declined compared with last year.
The FBR met the two-month target mainly because of higher collection in July, while it missed the August target by Rs29 billion. Against the August target of Rs930 billion, the tax authority collected Rs900 billion till Monday evening.
The government and the International Monetary Fund (IMF) have agreed on an annual tax collection target of Rs15.263 trillion for the current fiscal year. The target requires a 17.4 percent increase over last year’s collection.
The IMF has also made meeting tax targets binding, with approval of its sixth loan tranche linked to achieving the H1(first-half) target.
Provinces have committed to provide a little over Rs1 trillion in grants to the federal government for defence and water projects, subject to the FBR collecting Rs15.263 trillion in revenue. The government has also introduced revenue and enforcement measures worth more than Rs1 trillion in the budget to help the FBR meet the target.
Income tax collection stood at more than Rs685 billion during the first two months, falling Rs74 billion short of the target. The collection also declined by Rs29 billion from the same period last year, recording negative growth of four percent.
Sales tax collection, meanwhile, reached Rs719 billion, exceeding the target by Rs85 billion. The figure was also 14 percent, or Rs86 billion, higher than last year.
Of the sales tax collection, Rs496 billion, or 69 percent, came from the import stage. The government changed the law in the budget to allow sales tax on market prices instead of factory-gate prices for numerous items. The change has reduced opportunities for tax evasion but has also broken the value-added chain.
Federal excise duty collection stood at Rs118 billion, almost matching the target and increasing by Rs3 billion from last year. Customs duty collection reached Rs198 billion, slightly below the target and at the same level as last year.
More than Rs810 billion, or 47 percent of total tax collection, came from the import stage, where chances of evasion were considered low. The FBR also paid Rs155 billion in tax refunds, around Rs31 billion more than last year.
The tax authority continues to face implementation issues with its enforcement measures. According to the reports, there has been a delay in restricting economic transactions by ineligible persons due to political reasons, while Pakistan Revenue Automation Limited (PRAL) has been unable to design a system needed to implement the measure effectively.
