Islamabad:
The federal government has missed the annual tax target of almost RS13 trillion with a record margin of approx. RS1.2 trillion, as authorities could not increase tax revenue to 10.6% of the size of the economy, despite having put an unprecedented further burden on the people.
The collection was nevertheless RS2.43 trillion or 26% higher than the previous year, which turns out that independent analysts corrected that the government had set a wrong target in the first place, which was impossible to achieve without a mini-budget.
Federal Board of Revenue (FBR) Completely collected RS11.73 trillion in fiscal policy 2024-25-there is missing the target with approx. RS1.2 trillion, according to its preliminary figures Monday, the last day of the economic year.
The federal government had given an obligation to the International Monetary Fund (IMF) that it would increase the tax-to-BNP ratio to 10.6% in the 2024-25 financial year. However, the ratio remained at just over 10.2% of GDP, according to the preliminary figures prepared for Monday night.
The lack of approx. RS1.2 trillion is unprecedented because the government had imposed a record RS1.3 trillion in additional taxes in the budget. This follows the financial year 2019-20, where the economy suffered a lot due to Covid-19 and as a result the target was missed by a margin of RS1.6 trillion.
After taking over the office last August, FBR chairman Rashid Langrial had said that the collection through additional measures may not be more than the RS650 billion due to slowdown of the economy and inflation fell to single digit.
Last July, former FBR chairman Amjad Zubair Tiwana had said that regardless of the amount of efforts that FBR would put in, the annual collection could not exceed RS11.8 trillion. His prophecy was proven correctly.
The government overloaded the wage class and taxed almost all essential consumer goods, including packed milk, to raise RS12.97 trillion in taxes.
The FBR had to chase an unrealistic tax target combined with a slower economy and falling inflation – the three key factors that have overshadowed the 26% increase in the collection from the weak economy.
Finance Minister Muhammad Aurangzeb had promised to achieve it over RS12.9 trillion goals without the need for the mini-budget. He could not succeed, although the government increased petroleum tax rates to register the RS78 per year. Liters to offset the impact of tax deficits on the primary budget surplus target. At the beginning of the financial year, the petroleum tax rate was RS60 per year. Liter of gasoline and high -speed diesel.
The huge deficit is also far more than what the government had committed to the IMF just in March this year, as the lender lowered the target of the RS640 billion for the full financial year. Then the government revised further down the target to RS11.9 trillion in June, which was also missed.
Prime Minister Shehbaz Sharif has personally focused on FBR’s affairs, and he has tried to introduce many new initiatives, including digital tracking of the economy and focusing on vulnerable sectors.
FBR chairman Langrial also received several tax incentives for its workforce, including giving them new 1,300 cc cars and another to four monthly salaries.
The federal government approved RS55 billion value of two projects to FBR to strengthen its workforce, create new custom positions along the Indus River to slow down smuggling and upgrade digital infrastructure. The tax authorities said the results of all these initiatives would be visible in the new financial year.
Langrial also promised to make statements from the most important financing managers to the companies to check during the statement of sales and to collect more revenue from the companies and the people, including the richest Pakistan. However, all such initiatives did not help to reach the goal.
The government also could not fulfill the obligation to charge RS50 billion in income taxes from the retailers under the Tajir Dost scheme. The collection couldn’t even reach RS50 million.
For the new financial year, the government has determined RS14.13 trillion worth of the tax target for FBR, which requires 20% growth in the collection in the last financial year’s revenue.
For the month of June, FBR’s target was RS1.67 trillion. Despite taking progress and slower reimbursement, it could collect RS1.49 trillion, which is missing the target with approx. RS180 billion.
The IMF forced the country to impose new taxes, primarily strain of the wage class and charge taxes on almost all consumer goods, including medical samples, stationery, vegetables and children’s milk.
Raising tax collection
FBR missed its targets for turnover tax, federal excise duty and customs duty, but again exceeded the income tax target on the back of overload of the wage class.
According to the details, income tax collection was almost RS5.8 trillion, RS340 billion more than the target. It was also RS1.25 trillion more than last year. The burden was shared by the wage class and the business sector as retailers and landlords still remained during tax.
Around VAT, RS3.9 trillion, almost RS1.03 trillion, amounted to less than the target of over RS4.9 trillion. The turnover tax remained the most difficult area for FBR, and one of the reasons for low collection was less than estimated growth in large industries. The government had tremendously increased the VAT load in the budget. The collection was RS812 billion more than last year.
FBR collected RS767 billion in the federal excise duty, RS187 billion less than the target. But it was RS190 billion higher than the last year. The government does not spare home, lubricants, fruit juices, cement, sugar, etc. from imposing the excise duty in the last budget. Still, it failed to reach the goal.
Custom collection amounted to RS1.28 trillion, RS315 billion below target. The collection was hit by lower than projected import quantities. It was RS173 billion more than last year. FBR paid RS493 billion in tax refuses, which were RS13 billion more than the previous year.
