Beating target, FBR collects Rs3.35tr

ISLAMABAD:
The Federal Board of Revenue (FBR) exceeded its seven-month tax collection target by Rs262 billion but missed the monthly goal for the second month in a row due to poor domestic sales tax collection and a slowdown in imports.

Still, the FBR bagged nearly 53% of the total collection at the import stage, which helped camouflage its weaknesses in the area of domestic sales tax.

Against the original, relatively low tax target of nearly Rs3.1 trillion, the FBR provisionally collected Rs3.35 trillion during July-January of current fiscal year, according to an FBR’s statement.

The collection was Rs780 billion, or 30%, higher compared to the collection of Rs2.57 trillion in the same period of previous year.

The FBR said that it paid Rs182 billion in tax refunds, up 36%. Official statistics showed that while sales tax receipts at the import stage increased 69%, the domestic sales tax collection shrank nearly 10%, which speaks volumes about the inefficiency of the tax department.

The domestic sales tax collection dipped despite the fact that the nominal gross domestic product (GDP) growth rate was estimated at 16%.

The FBR has not revised upwards its monthly targets so far despite imposing 17% sales tax on almost every consumable item, including pastries, bread and food sold at restaurants.

Under a deal with the International Monetary Fund (IMF), the current target of Rs5.829 trillion will go up to Rs6.179 trillion, which will also bring changes to the monthly targets.

The IMF’s scepticism about the consistency in FBR’s performance over the long term due to the possibility of a slowdown in imports has again proved to be correct, as the FBR missed the monthly target for the second time in a row in January 2022.

It missed the monthly tax target by Rs27 billion. Against the target of Rs457 billion, the tax authorities provisionally collected Rs430 billion in January, according to the provisional results.

In January, the FBR missed the targets of sales tax, federal excise duty and customs duty. But the income tax collection target was surpassed by Rs15 billion.

The FBR missed the chance to introduce some structural changes during the time it was getting windfall gains due to steep currency devaluation and higher imports.

Tax authorities may now face some challenges once the target is officially adjusted upwards and imports stabilise.

There was no change in the contribution of various taxes to the total tax collection and indirect taxes remained a predominant source of revenue generation despite Prime Minister Imran Khan’s focus on widening the tax base.

Overall, the FBR collected 65%, or Rs2.2 trillion, in indirect taxes – general sales tax, customs duty and federal excise duty, which were the three main sources of indirect taxes.

Similarly, Rs1.75 trillion, or 52.5%, of the total collection was at the import stage.

The reliance on indirect taxes has increased inflationary pressure at a time when the country is witnessing rupee depreciation. There are hardly any goods consumed by the children and adults that have not been taxed in the mini-budget.

The FBR collected Rs1.18 trillion in income tax in the first seven months of current fiscal year, up Rs229 billion, or nearly one-fourth, over the same period of previous year.

Over Rs164 billion worth of income tax was collected at the import stage, which was higher by Rs19 billion than the target set for July-January FY22. The share of income tax in total revenue stood at 35%, which placed increased burden on people who had lower payment capacity. The Pakistan Tehreek-e-Insaf (PTI) election manifesto had promised to increase the share of direct taxes to 45% from 38%.

The FBR recorded 35% growth in sales tax collection in the July-January period due to heavy reliance on import taxes. It collected Rs1.45 trillion in sales tax, up Rs374 billion.

The total increase in sales tax collection was lower than the jump in sales tax receipts at the import stage due to negative growth in domestic sales tax collection.

The FBR collected Rs423 billion in domestic sales tax compared with Rs468 billion last year, a dip of 9.6%.

Contrary to that, sales tax collection at the import stage stood at Rs1.02 trillion in the first seven months of FY22 against Rs609 billion last year. There was an increase of Rs419 billion, or 69%, in sales tax collection at the import stage.

As compared with the target, the total sales tax collection was higher by Rs190 billion, thanks to higher imports.

Federal excise duty collection amounted to Rs172 billion, which was higher by Rs23 billion than the corresponding period of previous year.

Customs duty collection increased to Rs548 billion, higher by Rs152 billion, or 38%. It was Rs55 billion more than the target.

Exit mobile version