ISLAMABAD: The Federal Board of Revenue (FBR) has missed its collection target for March by almost 8.80%, or Rs64 billion, due to a sharp drop in imports as well as poor performance in domestic collection of sales tax.
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According to provisional data statistics made available the other day and published today, revenue collection stood at Rs663bn in March, as against the target of Rs727bn. This marks a reversal of trend and will make it a daunting task for FBR field formations to make a recovery from the huge shortfalls in the last quarter of FY23.
It may be recalled that the FBR had previously reported a massive revenue shortfall of Rs225 billion in December 2022, as it provisionally collected Rs740 billion against the assigned target of Rs965 billion.
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However, March’s collection posted a 15.3% growth when compared with last year’s Rs575bn, and a few more billions are expected to come to the national exchequer when book adjustments are made in the next few days.
Despite this, the first nine months’ shortfall in revenue collection has reached Rs278bn, as total collection stood at Rs5.155 trillion in the first nine months of 2022-23 against the target of Rs5.433tr. The tax authorities recorded a 17.55% growth over Rs4.385tr collected in July-March 2021-22, which is much below what the government had committed to the International Monetary Fund to achieve the projected target of Rs7.47tr for FY23.
The FBR had raised the sales tax rate from 17% to 18% on February 14 and the excise duty on cigarettes also increased significantly. However, the revenue projection in three and a half months from these two measures is estimated at Rs115bn. The overall new tax measures implemented from March 1 were estimated to raise additional tax payments for the government kitty in the range of Rs170bn in the next three months.
Despite these measures, the performance of tax machinery remains below expectations, and FBR has not been able to achieve its revenue collection target for March. The impact of a nearly 30% inflation besides the highest ever depreciation of the rupee is also not reflected in the revenue collection.
According to tax officials, the maximum collection is made under the head of income tax. However, the collection of income tax is still behind the projected target in 9MFY23, and FBR withheld the income tax refunds because nearly Rs14bn refunds were paid in the first nine months of FY23.
The collection of sales tax is far behind the projected target for the nine months, and a paltry growth was recorded when compared with the same collection of last year. The domestic sales tax collection did not perform well despite unprecedented inflation. The customs collection also saw a more than Rs38bn shortfall in March. However, the excise duty collection posted a growth owing to a massive increase in excise rate on cigarettes, travel tickets, and juices/drinks.
