The Federal Board of Revenue (FBR) missed its collection target by Rs430 billion or 6.47pc to Rs6.21 trillion for the first 11 months of the fiscal year 2023 (11MFY23) against the target of Rs6.64tr, leaving behind a huge shortfall to plug in the month of June to achieve the annual target.
The tax authorities, however, recorded a 16pc growth of over Rs5.37tr collected in July-May FY22. The revenue collection saw a steep decline in imports as well as poor sales tax performance, showed provisional data on Thursday.
The revenue collection stood at Rs572bn in May against the target of Rs621bn, showing a shortfall of Rs49 billion. This reversal of trend will make it a daunting task for the FBR field formations to make a huge recovery in the last month of June to achieve the annual target.
However, May’s collection posted 15.5pc growth compared to last year’s Rs495bn. A few more billions may come to the government kitty when book adjustments are made in the next few days.
The growth is much below what the government had committed to the International Monetary Fund to achieve the projected target of Rs7.47tr for FY23.
An official announcement of the FBR said that refunds amounting to Rs33bn were issued in May. It collected Rs205bn under the head of domestic income tax compared to Rs131bn in May 2022, thereby showing a growth of 57pc.
This growth is mainly due to the revenue measures especially the super tax on rich people.
On Feb 14, the FBR raised the sales tax rate from 17pc to 18pc. Similarly, the excise duty on cigarettes also increased significantly. The revenue projection from these two measures in three and half months is estimated at Rs115bn.
The new tax measures implemented from March 1 were estimated to raise additional tax payments for government kitty in the range of Rs170bn in the next three months.
At the same time, the Supreme Court on Feb 7 also ordered big taxpayers to deposit 50pc of their super tax with the FBR.
All these measures did not help FBR to achieve its revenue collection target for May. However, the performance of tax machinery remains below expectations despite several revenue measures. The impact of over 36pc inflation, besides the highest-ever depreciation of the rupee, is also not reflected in the revenue collection.
The tax collection at the import stage fell drastically in 11MFY23 compared with the projected target for the same period. The decline was mainly attributed to a fall in imports of high-duty items like automobiles, electronic appliances, ceramics, and other non-essential products.
The focus of the government is only to allow the import of energy, food and pharmaceutical products in a bid to save foreign exchange of the country.
This is clear from the fact that the customs collection in the month of May stood at Rs75bn as against the projected target of Rs105bn, a shortfall of Rs30bn in customs collection.
The data shows that direct tax collection remained on target in the 11 months of the current fiscal year. However, the income tax refunds remained negligible in the current fiscal year.
The overall sales tax collection did not perform well despite unprecedented inflation and increased GST rate to 18pc from 17pc. The sales tax collection fell short of the target in 11 months of the current fiscal year. The federal excise duty also fell short of the target in 11MFY23 despite the increase in cigarette rates and expansion of excise duty to other sectors.
According to the FBR announcement, a healthy year-on-year growth of 28pc was achieved in the domestic sales tax with a collection of almost Rs100bn. Around Rs41bn were collected as Federal Excise Duty (FED) showing a year-on-year increase of 32pc.
It further said that a cumulative growth of almost 44pc has been achieved in the collection of domestic taxes. This is despite the fact that the economy has slowed down and GDP growth rate has been revised downward. Cumulative growth of almost 44pc has been achieved in the collection of domestic taxes. However, on the import side same momentum could not be maintained due to unprecedented compression in imports.
In US dollar terms, imports in the country declined by 37pc in May 2023 compared to May 2022. Moreover, the import of high-duty items such as vehicles, and home appliances, as well as miscellaneous consumer goods such as garments, fabrics, footwear, etc have been drastically reduced, changing the import mix. This has impacted the collection of Customs duties and other taxes.