“The FBR revenue forecasts for FY 2020-23 based on expected collection for FY 2022 i.e. Rs6,100 billion, buoyancy estimates and macroeconomic indicators is Rs7,004 billion. This excludes the policy and administrative/enforcement measures,” said FBR in its report ‘Evidence-Based Revenue Forecasting FY 2022-23’. The FBR report included tax collection target of Rs7,004 billion, which was initially set in annual budget. However, later, target was upward revised to Rs7,450 billion on the direction of International Monetary Fund (IMF).
The autonomous growth has been applied on base year’s (FY 2021-22) expected collection (Rs6,100 billion) for each respective tax, which estimates an increase of Rs1,004 billion for the FY 2022-23. This addition has been added in the expected collection of FY 2021-22, thus the revenue forecast for FY 2022-23 has been obtained to the tune of Rs7,004 billion. The required growth over the expected collection of FY 2021-22, i.e. Rs6,100 billion would be 14.8 percent for FY 2022-23.
The FBR has projected that the tax-to-gross domestic product (GDP) ratio at 9.5 percent during 2022-23 against 8.5 percent in 2021-22. The FBR revenue collection has shown a steady increase in the last few years. Despite ongoing COVID-19 challenges such as lockdowns and disruptions of international supply chains, the growth in revenues was 4.4 percent immediately after the first pandemic year, which was further increased to 18.7 percent in 2020-21. The FBR’s tax-GDP ratio remained between 8.4 percent to 9.8 percent during last five years. During FY 2018-19 and FY 2019-20, tax-GDP ratio declined, which was mainly attributed to the COVID-19 pandemic-related economic challenges. However, again it started to increase in FY 2020-21 as pandemic was effectively managed in Pakistan and world was also opening up, the FBR report added.
The overall FBR taxes are buoyant and there is a potential for achieving growth in tax revenues provided that macroeconomic indicators are doing well. It is evident from last 20 years data that FBR revenues increased substantially. The tax-wise breakdown reveals that the direct tax DT (domestic) and sales tax ST (domestic) are most buoyant with 1.16 and 1.12 respective buoyancy values. On the other hand, ST (M), customs and FED have relatively lower buoyancies. In this regard, addressing the issues of narrow base, unnecessary exemptions and under invoicing/valuation problems at import stage can be instrumental for making these taxes more buoyant, thus enabling the revenue organisation to fetch more tax revenues.
It is estimated that the total FBR collection for the next year would be Rs7,004 billion. However, the revenue collection and achieving of target would largely depend on the performance of the economy against the targets and the effective enforcement by FBR.