ISLAMABAD: The Federal Board of Revenue (FBR) missed its collection target for March by almost 8.80 per cent, or Rs64 billion, owing to a sharp drop in imports as well as poor performance in domestic collection of sales tax, showed provisional data released on Friday.

The revenue collection stood at Rs663bn in March as against the target of Rs727bn. This reversal of trend will make it a daunting task for FBR field formations to make a recovery from the huge shortfalls in the last quarter of FY23.

However, March’s collection posted a 15.3pc growth when compared with last year’s Rs575bn. A few more billions will come to the government kitty when book adjustments are made in the next few days.

As a result of March’s dip, the first nine months’ shortfall in revenue collection reached Rs278bn as total collection stood at Rs5.155 trillion in the first nine months of 2022-23 against the target of Rs5.433tr. The tax authorities recorded a 17.55pc growth over Rs4.385tr collected in July-March 2021-22.

Shortfall widens to Rs278bn in first nine months of current fiscal year

FBR expects a few more billion when revenue collection is finalised.

The growth is much below what the government had committed to the International Monetary Fund to achieve the projected target of Rs7.47tr for FY23.

On Feb 14, the FBR raised the sales tax rate from 17pc to 18pc. Similarly, the excise duty on cigarettes also increased significantly. The revenue projection in three and half months from these two measures is estimated at Rs115bn. The overall new tax measures implemented from March 1 were estimated to raise additional tax payments for government kitty in the range of Rs170 in the next three months.

At the same time, the Supreme Court on Feb 7 also ordered big taxpayers to deposit 50pc of their super tax with the FBR.

According to an official source, all these measures did not help FBR to achieve its revenue collection target for March. However, the performance of tax machinery remains below expectations despite several revenue measures.

The impact of a nearly 30pc inflation besides the highest ever depreciation of the rupee is also not reflected in the revenue collection.

According to tax officials, the maximum collection is made under the head of income tax. One of the major reasons is the collection of the super tax in March following the order of the Supreme Court. However, the collection of income tax is still behind the projected target in 9MFY23.

The official believed that it will be bridged in the next three months owing to the full collection of all other budgetary revenue measures. However, FBR withheld the income tax refunds because nearly Rs14bn refunds were paid in the 9MFY23.

The collection of sales tax is far behind the projected target for the nine months. However, a paltry growth was recorded when compared with the same collection of last year. The domestic sales tax collection did not perform well despite unprecedented inflation.

The customs collection also saw a more than Rs38bn shortfall in March. However, the excise duty collection posted a growth owing to a massive increase in excise rate on cigarettes, travel tickets and juices/drinks.

Published in Dawn, April 1st, 2023