ISLAMABAD-The federal government is contemplating various revenue generation measures following the shortfall in tax collection in the month of October to fulfil the commitment to the International Monetary Fund (IMF).
The Federal Board of Revenue (FBR) for the first time in the current fiscal year (starting from July 2022) has missed the tax collection target for October by Rs22 billion. The FBR has provisionally collected Rs512 billion in October 2022 against the assigned monthly target of Rs534 billion, showing a shortfall of Rs22 billion. The tax collection target was missed mainly due to contraction in imports and devastation triggered by the floods in different parts of the country. However, the FBR has surpassed the four months tax collection target by Rs4 billion. The FBR’s provisional tax collection stood at Rs 2,147 billion during the first four months (July-October) 2022-23 against the assigned target of Rs 2,143 billion, reflecting an increase of Rs 4 billion.
The government of Pakistan had committed with the IMF to take fresh tax collection measures (which could also be called a mini budget) if the monthly tax collection target gets missed in the ongoing financial year. “If monthly revenue data show signs of underperforming against the Q1 FY23 and subsequent targets, we will take immediate action to raise additional revenue,” Pakistan stated in written to the IMF a few months before. The revenue generation measures included immediately setting the GST on fuel products to a rate sufficient to raise the necessary revenue up to the standard rate of 17 percent; further streamlining GST exemptions including on sugary drinks (Rs 60 billion), and other unwarranted exemptions such as those benefitting exporters; and increasing Federal Excise Duty on Tier I and Tier II cigarettes by at least Rs2/stick with immediate effect to raise at least another Rs 120 billion in revenue.
Officials in the ministry of finance and FBR informed The Nation that Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar would take the final decision for announcing new revenue generation measures. An official hinted for imposing a General Sales Tax (GST) on oil products for additional revenue generation measures as per commitment with the IMF. Currently, the government is not charging GST on petroleum products, as it is collecting only petroleum levy. The government has recently increased the petroleum levy on petrol to a record high of Rs50 per liter. At present, there is a petroleum levy of Rs30 per liter on high octane blending component (HOBC), Rs8 per liter on kerosene oil, Rs12.59 per liter on high-speed diesel, Rs6 per liter on light diesel oil.
The FBR is now facing a challenging task to collect over Rs700 billion revenue for November 2022 to overcome the October shortfall of Rs 22 billion. It is worth mentioning here that for the current fiscal year, the government had set the tax collection target at Rs7.470 trillion on the IMF’s demand, which will require about 22% growth in collection.
According to the latest report of the ministry of finance, despite import compression, the zero rates of Sales Tax on POL items, and the flood situation, FBR tax collection in the first quarter of the current fiscal year has been remarkable on the back of an effective revenue mobilization strategy. However, an expected slowdown in economic activity and growth due to the devastation triggered by the floods may impact domestic resource mobilization efforts.