The Federal Board of Revenue (FBR) in Pakistan has fallen short of its revenue collection target for the first 11 months of fiscal year 2023 (11MFY23) by Rs 430 billion or 6.47 percent.
The target was set at Rs 6.64 trillion, but the actual collection amounted to Rs 6.21 trillion. This significant shortfall poses a challenge for the FBR to achieve the annual target as they enter the final month of June.
Moreover, the annual budgetary collection target is set to be missed by almost Rs 522 billion, or 8.83%, for the outgoing fiscal year (FY23) owing to a steep decline in dutiable imports as well as poor collection of general sales tax (GST).
The provisional data revealed a decline in revenue collection from imports and poor performance in sales tax. In May, the FBR collected Rs572 billion, falling short of the Rs621 billion target by Rs49 billion.
However, there was a 15.5 percent growth compared to the previous year’s collection of Rs495 billion. It is expected that additional revenue may be generated through book adjustments in the coming days.
The growth in revenue falls short of the government’s commitment to the International Monetary Fund, which projected a target of Rs7.47 trillion for FY23.
In May, Rs33 billion in refunds were issued, and domestic income tax collection amounted to Rs205 billion, showing a 57 percent growth compared to May 2022. This growth can be attributed to revenue measures, particularly the imposition of a super tax on wealthy individuals.
Despite raising the sales tax rate and implementing other tax measures, the overall performance of the tax machinery remains below expectations.
The impact of high inflation and currency depreciation has not been reflected in revenue collection. The decline in import-stage tax collection is primarily due to reduced imports of high-duty items such as automobiles, electronic appliances, ceramics, and non-essential products.
The government’s focus is on allowing the import of essential items like energy, food, and pharmaceutical products to conserve foreign exchange. However, customs collection in May fell short by Rs30 billion compared to the projected target of Rs105 billion.