Tax Revenues Jump to Rs. 1.7 Trillion But Still Lag Behind Targets

Revenue collection has increased significantly however it still hasn’t reached FBR’s target.

As of Saturday, the Federal Board of Revenue (FBR) has collected over Rs. 1.712 trillion during the first half of the fiscal year 2017-18, registering a growth of over 16.3% in overall collection.

The amount, however, remained behind the target of 19.2% which is required to hit the annual target of Rs. 4.013 trillion.

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Customs and Duties

According to provincial tax authorities, the customs and regulatory duties were the primary contributors for the collection from July to December of the fiscal year 2017-18. The customs duty collection was approximately Rs. 290 billion in the first half, increasing 33% compared to last year.

FBR claimed that the collection, which has doubled from one-tenth to two-tenths of the total revenue, may further increase once all remaining payments are cleared. The Board will still miss its first-half’s target of Rs. 1.801 trillion. This will add about 0.3% of the GDP to the national budget deficit.

Against the collection target of Rs. 438.2 billion, the FBR’s monthly collection was Rs. 406 billion in December — which is, however, 4.6% higher than the collection made in December 2016.

According to officials at the Ministry of Finance, the FBR’s collection was 42.6% (Rs. 1.712-trillion) against the requirement of 45% of the annual target in the first half.

Earlier, the Finance Ministry and FBR had assured the IMF that the annual revenue collection target will be achieved.

IMF’s Expectations

IMF was expecting that Pakistan’s budget deficit would increase to a minimum 5.4% of the GDP (Rs. 1.95 trillion) against the Finance Ministry’s expectation of 5% (Rs. 1.810 trillion). Meanwhile, the original budget deficit target approved by the parliament is 4.1% of the GDP (Rs. 1.479 trillion).

Despite having the advantage of high regulatory duty and rupee devaluation, FBR is struggling to boost its revenues. According to the Revenue Board, “about 7.2% devaluation of Rupee against the US dollar would give it an extra benefit of a minimum Rs. 55 billion.”

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The number of income tax return filers remained at 1.140 million which means that FBR is also battling to enhance the narrow tax base.

All in all, the FBR’s tax-to-GDP ratio stood at 10.5% at the end of the fiscal year 2016-2017 which is one of the lowest tax-to-GDP ratios in the world.

Via Tribune