ISLAMABAD- Despite achieving nine months tax collection target by wide margin, the Federal Board of Revenue (FBR) would still face gigantic task to collect massive Rs1.3 trillion in last quarter (July to March) of the current fiscal year to meet its annual target.

The FBR has collected net revenue of Rs3,394 billion during nine months (July-March) period of the current fiscal year, which has exceeded the target of Rs3,287 billion by more than Rs107 billion. This represents a growth of about 10 percent over the collection of Rs3,076 billion during the same period last year. In remaining quarter of the current fiscal year, the FBR would have to collect Rs1323 billion to achieve the revised tax collection target by the end of June this year.

The government of Pakistan had recently agreed with the International Monetary Fund (IMF) to revise downwards the annual tax collection target for FY2020-21 by Rs246 billion to Rs4,717 billion from Rs4,963 billion. The reduction in tax collection target would create problems for maintaining budget deficit within the target. The government had requested the IMF to downward revise the tax collection target as the annual target was unrealistic. The collection of Rs1323 billion in three months period is still challenge for the FBR due to the possible slowdown in economic activities aimed third wave of the Covid-19. 

“FBR’s tax collection is on track. However, the Covid-19 is real threat for the government in increasing its taxes,” said an official of the FBR. He said that government would reach near the revised target if the Covid-19 does not slowdown the economic activities in remaining three months of the financial year. “During April-June 2021, it is expected that this revenue performance would be improved substantially compared to 2020 when economic activities were disrupted due to COVID,” the FBR said in a statement.

The continuous increase in tax collection had helped the government in keeping primary budget in surplus in first seven months (July to January) period of the year 2020-21. First seven months of FY2021 have witnessed considerable improvement in fiscal indicators. Substantial increase in net federal revenue receipts and effective management of expenditures helped in containing the fiscal deficit at 2.9 percent of GDP during Jul-Jan, FY2021 (-3.2 percent in the same period of the last year). The primary balance continues to remain in surplus and increased by 0.9 percent of GDP to reach Rs 416 billion in Jul-Jan,FY2021 (Rs 153 billion, 0.3 percent of GDP in the corresponding period of the previous year).

The ministry of finance in its monthly report stated that fiscal performance from Jul-Jan, FY2021 shows that the fiscal consolidation policy helped in preserving fiscal discipline, increasing revenues, and controlling expenditures. On the revenue side, the FBR tax collection continues to improve, having exceeded the eight-month target by Rs 17 billion. Eight months performance indicates that it will remain on track and the current fiscal year would end up meeting the set target. However, the increase in COVID infection and related containment measures may pose certain challenges; especially the expenditure side may come under pressure.