The Federal Board of Revenue (FBR) is legally bound to immediately take taxation measures of Rs. 180 billion in any month of 2022-23 when the tax machinery fails to achieve the assigned monthly revenue collection target during the current fiscal year.
Highly-placed officials in the Ministry of Finance told ProPakistani that the International Monetary Fund (IMF) will review the performance of the FBR on monthly basis. The performance of the tax machinery would not be judged on a quarterly basis. If the FBR fails to achieve the assigned target in one of the months of 2022-23, it is legally bound to take measures of Rs. 180 billion agreed with the IMF.
The official explained that the FBR has met the assigned revenue collection targets for the months of July and August 2022. In July 2022, the FBR collected net revenue of Rs. 458 billion, which exceeded the target of Rs. 443 billion by Rs. 15 billion. The FBR has collected net revenue of Rs. 489 billion during August 2022, which has exceeded the target of Rs. 483 billion against Rs. 448 billion collected during the same period, last year.
Now, the tax machinery is required to collect Rs. 661 billion during September 2022 for meeting Rs. 1,609 billion target for the first quarter (July-September) period of the current fiscal year.
In case the FBR fails to generate revenue of Rs. 661 billion in September, the FBR would be required to impose taxes of Rs. 180 billion in October 2022.
Out of the enhanced revenue collection target of Rs. 7,470 billion set for 2022-23, the direct taxes revised projections stood at Rs. 3,053 billion; Federal Excise Duty (FED) target has been set at Rs. 470 billion; sales tax target has been set at Rs. 2,954 billion and customs duty projection has been set at Rs. 993 billion for the current fiscal year.
The commitment of the government of Pakistan to the IMF said,
In view of these risks, the government has committed to trigger contingency measures at the earliest signs of fiscal program underperformance. As soon as monthly data show signs of underperformance against program revenue targets (e.g., if data for an early month within a quarter suggest risks to quarterly performance), the government has committed to activate contingency measures as needed, including:
- Immediate increase in GST on fuel, as a prelude to reaching the standard rate of 17 percent;
- Further streamlining of GST exemptions including on sugary drinks (PRs 60 billion) and other unwarranted exemptions such as those benefiting exporters; and/or
- Increasing Federal Excise Duty on Tier I and Tier II cigarettes by at least PRs 2/stick with immediate effect to raise at least another PRs 120 billion in revenue.”