As the Federal Board of Revenue (FBR) has failed to meet its goal for the upcoming month of December 2022, Finance Minister Ishaq Dar has issued a directive to the organization to do everything in its power to realize the country’s true tax potential.
The remarks were made by the finance minister while he was leading a meeting in Islamabad about FBR’s revenue performance.
FBR Chairman Asim Ahmad gave a comprehensive presentation at the meeting about FBR’s revenue goals and performance for November and December 2022.
It is pertinent to note that FBR faces a 225 billion rupee revenue shortfall for the upcoming month of December 2022; In comparison to the desired goal of Rs965 billion, the tax collection machinery only collected Rs740 billion.
Without taking additional and substantial taxation measures, such as a mini-budget for the current fiscal year, the government will now find it difficult to persuade the International Monetary Fund (IMF) to revive the stalled IMF program due to the increased revenue shortfall.
The public authority is mulling over choices for the burden of Flood Duty in the scope of 1% to 3% to bring Rs60 billion. In addition, additional direct taxation measures are planned. However, because widespread taxation during a time of widespread stagflation could further erode already sluggish economic activities, the government has chosen to focus on only those sectors that generated substantial profits. This puts the government in a catch-22 situation.
However, sources from the FBR argued that the target for revenue collection was lowered as a result of import compression and ongoing litigation in higher courts. They have informed the IMF that the pending revenue collection will not begin until March 2023. Therefore, they believe that the FBR’s annual goal of Rs7.47 trillion would remain unchanged.
However, independent analysts believe that the FBR will have a difficult time reaching its desired tax collection goal of Rs7 trillion by June 30, 2023. In contrast to the desired goal of Rs3.673 trillion, the FBR has so far collected Rs3.428 trillion during the first half of the current fiscal year (July through December). During the same time frame, July through December of the previous fiscal year 2021–2022, the FBR received Rs2.9 trillion in revenue.
The FBR has collected Rs3,428 billion in the first six months of the current fiscal year 2022-23, representing an increase of 17% over the Rs2,929 billion collected during the same period last year, as stated in the official statement.
For the month of December 2022, the FBR received Rs740 billion, compared to Rs599 billion for the same period the previous year. This represents an impressive increase of almost 24% when compared to the same period the previous year. Despite a zero rating on petroleum and significant import compression, this performance
Direct tax collections have increased by 66% between December 2022 and December 2021, indicating that the policy of shifting the burden of taxes onto the wealthy and affluent has been successful. In the first six months, direct tax collections have also increased by an unprecedented 49%. This was accomplished despite the fact that certain policy interventions, which were included in the Finance Act 2022 and had a revenue impact of Rs250 billion, could not be implemented because they are under judicial review. Due to the aforementioned factors, the December goal of Rs. 965 billion was not achieved.
When the FBR also issued refunds totaling Rs176 billion in the first half of the current fiscal year, as opposed to Rs149 billion in the same period last year, the revenue collection performance is also exceptional.