Shafaqna Pakistan:The shortfall in tax revenue has widened to a whopping Rs218 billion in just five months of this fiscal year which has again raised prospects of a mini-budget after the rejection by the International Monetary Fund (IMF) of Pakistan’s request for the downward revision of the annual target.
The Federal Board of Revenue (FBR) also had to give a 15-day extension for filing annual income tax returns for tax year 2019 after the number of return filers remained below last year’s level of nearly 2.6 million people. Nearly 1.59 million had filed their income tax returns until the last working day, a number 50% higher than in the same period last year. However, over one million people who filed their income tax returns last year have not yet fulfilled their legal obligation.
From July through November, the FBR provisionally collected Rs1.611 trillion in taxes and fell short of its five-month target by Rs218 billion, according to FBR officials. The tax agency was supposed to collect the twice downward revised monthly target of Rs1.830 trillion from July through November of this year.
The downward revised target for November was Rs411 billion that the FBR cut to Rs381.4 billion last month. Yet the FBR missed the monthly target by Rs44 billion, further widening the shortfall to Rs218 billion in five months, according to the provisional results. The growth in monthly collection was less than 16%.
The Rs1.611 trillion collection was 16.5% or Rs229 billion higher than the previous year but was largely the result of blocking exporters’ refunds.
On the insistence of the IMF, the federal government had set the FBR’s tax collection target at Rs5.5 trillion or 12.4% of the Gross Domestic Product, requiring an impossible growth rate of 44% over the previous year’s collection. The target had been set on the basis of the projected Rs4.150 trillion collections in the last fiscal year, which actually dipped to Rs3.829 trillion.
The FBR cannot collect more than Rs4.4 trillion in this fiscal year due to a depressed macroeconomic situation, said Dr Ashfaq Hasan Khan, member of the government’s Economic Advisory Council, on the Express News TV show ‘The Review’, aired Friday.
In the last fiscal year, the FBR had collected Rs3.829 trillion in taxes. The government took Rs735 billion worth of taxation measures in the current year’s budget while the nominal GDP growth is projected at 15% (3% real GDP plus 12% inflation), which will help collect additional taxes of Rs574 billion.
The growth in revenue collection in the first five months was slightly above the nominal GDP growth rate of 15%. But the FBR believes that its efforts were undermined due to imports compression, as there was healthy growth of over 20% at the domestic stage.
The FBR has missed the July-November tax collection targets of income tax, sales tax, custom duties and federal excise duties despite slapping Rs735 billion additional taxes and imposing 17% sales tax on local sales of five export-oriented sectors.