New year begins with a mammoth revenue shortfall in December

Published January 1, 2023
A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, Pakistan December 3, 2018. — Reuters/File
A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, Pakistan December 3, 2018. — Reuters/File

ISLAMABAD: Having exceeded projections in the first five months of the current fiscal year, the Federal Board of Revenue (FBR) missed its collection target for December by almost 24 per cent, or Rs225 billion, owing to a sharp drop in imports as well as delay in collection of super tax from maximum taxpayers, showed provisional data on Saturday.

The provisional revenue collection stood at Rs740bn in December as against the target of Rs965bn. This reversal of trend will make it a daunting task for FBR field formation to make a recovery from the huge shortfalls in the second half of FY23.

However, December’s collection posted a 23.23pc growth when compared with last year’s Rs600.5bn. A few more billions will come to the government kitty when book adjustments are made in the next few days.

As a result of December’s dip, the first half-year shortfall in revenue collection reached Rs218bn to Rs3.428 trillion against the target of Rs3.646tr.

Govt plans ‘flood levy’ on imports to collect Rs60bn in 2HFY23

However, the collection rose 17pc in 1HFY23 against Rs2.929tr collected in July-December last year. This growth is much below what the government had committed to the International Monetary Fund to achieve the target for FY23.

Flood levy

As part of raising non-tax revenue, the government is expected to collect at the import stage an amount of Rs60bn under the flood levy in the second half of 2022-23. This amount will be adjusted against the shortfall in the petroleum development levy. The FBR will collect this levy for the federal government which will not be part of the divisible pool.

The FBR refunded Rs176bn during 1HFY23 compared to Rs149bn in the last year, reflecting an increase of 18pc. Exporters are complaining of stuck-up refunds and rebates during the months under review.

Provisional gross revenue collection rose to Rs3.604tr in 1HFY23 as against Rs3.078tr in the corresponding period last year.

The tax-wise break up showed that income tax collection jumped 62.5pc to Rs416bn in December against Rs256bn in the same month last year.

However, December remained short of the target by Rs130bn mainly because of the non-collection of super tax. FBR believes that litigation cases will be resolved in the third quarter and recovery of the shortfall will also be realised.

In the 1HFY23, income tax collection stood at Rs1.518tr against Rs1.024tr last year, a growth of 48pc. The income tax target for the 1HFY23 was Rs1.547tr which was missed by Rs29bn. Only Rs7bn income tax refunds were paid to taxpayers in the first half.

FBR has projected to collect Rs250bn from super tax in the current fiscal year.

The sales tax collection fell by 10pc to Rs204bn in December from Rs228bn in the corresponding month last year. The sales tax collection fell short of the target by Rs69bn in December.

Between July and December, the sales tax collection stood at Rs1.272tr against Rs1.278tr last year, indicating a decline of 1pc. The first half shortfall in sales tax collection stood at Rs104bn. It clearly shows that domestic sales tax collection did not perform well despite unprecedented inflation.

The Federal Excise Duty (FED) collection stood at Rs28bn in December against Rs25bn over last year, a rise of 14pc. However, it remained short of the target by Rs13bn. In 1HFY23, the FED collection increased by 12pc to Rs164bn against Rs146bn over the last year. The collection remained short of the target by Rs15bn in 1HFY23.

The customs duty collection fell 8pc to Rs84bn in December against Rs91bn last year. It remained short of the target by Rs21bn.

In 1HFY23, customs collection dipped 3pc to Rs466bn against Rs481bn last year. It fell short of the target by Rs77bn during the first half year.

Curbs on LCs hit imports

According to FBR officials, imports dropped significantly during the first half year because of the non-opening of letters of credit (LCs). A major drop was witnessed in a few major revenue spinners like automobiles—CBU and CKD and other machinery due to the import compression policy of the government. The collection at the import stage contributes almost 50pc in the total revenue collection.

The loss in revenue collection at the import stage varies between Rs30bn to Rs50bn per month. The contractionary policy will further impact the revenue collection in the coming months.

An official source in the finance ministry said that the IMF is on board over the stuck-up amount of super tax in courts. “We have informed the fund that it will be resolved by March FY23”, the source said, adding the remaining collection will be made in the next three months.

The source further said that there is no further demand for additional tax measures except the finance ministry’s proposal to impose a flood levy on imports. The decline in revenue collection is one of the reasons for the delay in the 9th review of the Extended Fund Facility programme.

Published in Dawn, january 1st, 2023

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Must Read

The dark heart of Zionism

The dark heart of Zionism

As Israel conducts a genocide in Palestine, bombs Lebanon, Yemen and Syria and seeks to pull Iran into a wider war, the Middle East teeters at the brink of what could potentially morph into a new world war.

Opinion

Editorial

A close watch
Updated 13 Oct, 2024

A close watch

Authorities will have to prove every six months that they are pursuing the IMF-mandated targets to secure the lender’s dollars and blessings.
Push and pull
13 Oct, 2024

Push and pull

MUCH remains at stake, but it is nonetheless reassuring that our politicians have returned to more parliamentary...
Rising rape
13 Oct, 2024

Rising rape

MISOGYNY is the bane of women’s lives across the globe as it robs them of autonomy over their bodies. This is...
Ghastly attack
Updated 12 Oct, 2024

Ghastly attack

Duki attack comes at a time when Pakistan’s foreign friends are looking to make major investments in the country, while SCO moot kicks off next week.
Saudi investments
12 Oct, 2024

Saudi investments

THE Saudi investment commitments to Islamabad seem to be taking tangible shape after months of uncertainty around...
Into the abyss
12 Oct, 2024

Into the abyss

THE Pakistan cricket team continues to set unwanted records. On Friday, Shan Masood’s men became the first team in...