The Federal Board of Revenue (FBR) collected Rs1.84 trillion in just four months, an increase of 37% or close to Rs500 billion over last year, on the back of higher imports, which made it difficult to build a case for mini-budget.
For the fourth successive month, the FBR sustained a healthy momentum of increase in tax collection. It exceeded the July-October target by Rs228 billion, an unprecedented feat for the revenue board that was known for missing targets until a few months ago.
Against the target of Rs1.6 trillion, the FBR provisionally collected Rs1.84 trillion, exceeding the goal by Rs228 billion, according to the FBR officials. The number may slightly go up once final figures are available.
The collection was also significantly higher than the previous fiscal year but the International Monetary Fund (IMF) remains sceptical about the consistency in FBR’s performance in the long term due to the possibility of slowdown in imports.
During the first four months of previous fiscal year, the FBR had collected Rs1.34 trillion and it now recorded a nearly Rs500 billion increase at a growth rate of 37%. The annual target of Rs5.829 trillion is within reach.
However, the IMF and Pakistan discussed over Rs525 billion in additional tax measures and talks boiled down to sales tax exemptions of around Rs400 billion that the fund said should be withdrawn with immediate effect.
Sources said that the IMF was building its case on the assumption that the growing imports – a key source for the exceptionally good performance – would eventually slow down.
The IMF’s argument has some steam in it as the sales tax collection at the domestic stage turned negative during the July-October period while sales tax collection at the import stage soared 79%.
Overall, the FBR collected 66% or Rs1.21 trillion in indirect taxes – general sales tax, customs duty and federal excise duty, which were the three main sources of indirect taxes.
Similarly, Rs957 billion or over 52% of the total collection was at the import stage.
The reliance on indirect taxes has increased inflationary pressure at a time when the country is witnessing rupee depreciation.
The FBR collected Rs622 billion in income tax in the first four months of this fiscal year, up by Rs151 billion or 32% over the same period last year. Over Rs87 billion worth of income tax has also been collected at the import stage.
The income tax collection was Rs56 billion higher than the target set for the first four months. The share of income tax in total revenues stood at 34%, which has placed an increased burden on people who have lower capacity to pay.
The Pakistan Tehreek-e-Insaf (PTI) election manifesto had promised to increase the share of direct taxes to 45% from 38%.
The FBR showed 41% growth in sales tax collection in the July-October period due to heavy reliance on import taxes. It collected Rs826 billion in sales tax in four months, up by Rs241 billion. However, the entire increase came at the import stage as the domestic sales tax collection turned negative.
The FBR collected Rs256 billion in domestic general sales tax (GST) compared with Rs267 billion last year, after adjusting for refunds.
Contrary to that, GST collection at the import stage stood at Rs569 billion in the first four months of the current fiscal year against Rs318 billion last year, an increase of Rs251 billion or 79%.
Total sales tax collection of Rs826 billion was Rs134 billion higher than the target, thanks to the collection at the import stage.
Federal excise duty collection amounted to Rs97 billion in the four month period, Rs16 billion or 20% more than the corresponding period of previous year.
Similarly, the customs duty collection increased to Rs291 billion, higher by Rs86 billion or 42%. The custom duty collection was Rs37 billion more than the target.
The net collection in October 2021 came in at Rs435 billion, registering an increase of 31% or Rs104 billion compared with October last year collection, according to the officials.