FBR faces Rs96bn revenue shortfall in first quarter

ISLAMABAD: The Federal Board of Revenue (FBR) has failed in achieving the first quarter (July-Sept) period target with a margin of about Rs96 billion agreed with the IMF, however, the tax machinery successfully fetched its monthly target of September 2024.

The FBR is heading towards touching and crossing the tax collection of Rs1,100 billion for September 2024 against the assigned target of Rs1098 billion for this month. In the first quarter (July-September) period, the FBR so far fetched Rs2556 billion against the envisaged target of Rs2,652 billion and thus faced a revenue shortfall of Rs96 billion. The IMF had warned Islamabad on the eve of granting approval for $7 billion Extended Fund Facility (EFF) loan program that if there was a shortfall of slightly over 2 percent in achieving the first quarter target then the government would have to consider takingadditional revenue measures during the current fiscal year.

The government plans stern enforcement measures including freezing of bank accounts, slapping ban on purchasing property and vehicles for potential tax dodgers but it requires legislative changes so the mini budget will be on cards to execute and implement such desired changes in tax laws. Secondly, the government will have to demonstrate its political will for going hard against tax dodgers but the challenges are lying ahead to demonstrate that how politically weak government will implement such politically tough decisions. For one go by the historic records, the broadening of tax base efforts proved futile in the past even during the tenure of military rulers including during the era of Gen (R) Pervez Musharraf when the shutter down strikes had forced the former dictator to reverse its documentation exercise in early 2000.

The FBR has been facing a gigantic task for achieving highly ambitious tax collection target of Rs12,970 billion approved by the Parliament (Rs12,913 billion agreed with the IMF) for the current fiscal year. Now the FBR is confronting with challenging situation to achieve growth in revenues close to 40 percent during the remaining three quarter (Oct to June) period of the current fiscal year. It will not be an easy task at all keeping in view the ability and capacity of the incumbent regime.

The FBR had collected Rs1,456 billion revenues during the first two months (July and August) of the current fiscal year. The FBR had collected Rs593 billion under the head of domestic income tax as compared to Rs437 billion in July & August 2023, thereby showing a growth of 36 percent.

As a result a cumulative growth of almost 35% has been achieved in the collection of domestic taxes. However, on the import side the same momentum could not be maintained due to continued compression in imports.

In dollar terms, imports have declined by 2.2% in August 2024 as compared to August 2023. Similarly, the imports during August 2024 in PKR value also showed a decline of 7% as compared to August last year.

The FBR’s overall growth in net collection registered a 21 percent increase on collection in first two months compared to the same period of previous fiscal year. Meanwhile, the FBR has so far announced that the date for filing income tax returns is not going to be extended.

So far, the FBR received 3.6 million return filings till Monday night. The FBR had received around 5.5 million returns during the last fiscal year so there was still a gap of around 2 million return filers compared to the last fiscal year. Pakistan Tax Bar Association have demanded of the FBR for granting extension of 15 days for filing of income tax returns.

The FBR has witnessed phenomenal growth in receiving tax returns till September 30, 2024 as it received 3.6 million so far in the current fiscal year compared to almost 1.7 million till the same period of the last fiscal year.

In an official statement issued by the FBR at 8.47 pm on Monday night that there was no truth in circulating news stories that the date of filing of income tax returns was going to be extended. It has been requested to all filers that they should file their returns within the stipulated timeframe for avoiding penalties envisaged under the tax laws.

However, the tax consultants and taxpayers were complaining that the return filing system got choked due to major influx on the system for filing of returns. However, later the FBR extended income tax return filing deadline till Oct 14