In Islamabad, the Federal Board of Revenue (FBR) has surpassed its tax collection target of Rs 6700 billion in the initial nine months of the current fiscal year.
Notably, there has been a substantial increase in income tax collection, leading to a reduced dependence on indirect taxation, which tends to fuel inflation.
During July-March, income tax contributed nearly half of FBR’s total receipts, marking a significant surge compared to previous periods. Against a target of 6.707 trillion, provisional data indicates that FBR collected 6.71 trillion during this timeframe, reflecting a 30% increase from the corresponding period last fiscal year.
FBR’s decision to seize Civil Aviation Authority’s bank accounts for the recovery of Rs 12.7 billion played a crucial role in surpassing the target. Despite an annual income tax exemption of Rs 50 billion granted to the Civil Aviation Authority and the Airport Authority, reportedly in violation of IMF programs and tax laws, FBR remained steadfast in its pursuit of tax recovery.
Although Pakistan has made strides towards economic stability, there remains a pressing need for comprehensive reforms in key sectors such as taxation, expenditure, and external affairs. Sectors like wholesale, retail, construction, and agriculture still lag behind in tax contributions.
The issue of low-tax sectors is expected to be addressed in the forthcoming IMF bailout program, as further taxation of salaried and corporate sectors faces resistance.
Meanwhile, Prime Minister Shehbaz Sharif has instructed FBR not to withhold tax refunds, resulting in a significant increase in refunds disbursed, totaling 369 billion rupees in nine months, a 45% increase from the previous fiscal year.
Income tax collection reached 3.27 trillion, surpassing the target of 568 billion, marking a 41% increase compared to the same period in the previous fiscal year. This increase can be attributed to banks, which recorded significant profits due to high-interest rates.
Sales tax collection stood at 2.24 trillion, 18% higher than the same period last fiscal year but relatively lower in current inflation-adjusted terms, indicating potential leakage in collections. FBR fell short of its target by 393 billion in sales tax collection.
Efforts to improve efficiency in this sector are imperative. Despite government measures to accurately assess commercial sector sales, desired outcomes have not been realized.
Federal excise duty amounted to 402 billion, slightly below the nine-month target but a notable increase from the previous year, with the tobacco and cement sectors driving collection growth.
Customs duties fell short by 153 billion, reaching only 809 billion in nine months, 16% higher than the previous year. The target was set based on monthly imports of $5 billion, but imports remained at $4.5 billion due to external challenges.