That the Federal Board of Revenue (FBR) has missed its tax collection target in the first 11 months of the fiscal year 2023 is reflective of the deceleration in imports in the wake of the measures taken by the incumbent government and the State Bank in order to tackle balance-of-payments troubles.
According to a report published on these pages, the FBR missed its collection target by Rs430 billion or 6.47pc to Rs6.21 trillion for the first 11 months of the fiscal year 2023 (11MFY23) against the target of Rs6.64tr, leaving behind a huge shortfall to plug in the month of June to achieve the annual target.
Indeed, the new FBR data show that the tax agency, however, recorded a 16pc growth of over Rs5.37tr collected in July-May FY22.
The overall breakdown of the past 11 months postulates that the revenue collection stood at Rs572bn in May against the target of Rs621bn, showing a shortfall of Rs49 billion. This reversal of trend will make it a daunting task for the FBR field formations to make a huge recovery in the last month of June to achieve the annual target.
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.
An official announcement of the FBR says that refunds amounting to Rs33bn were issued in May. It collected Rs205bn under the head of domestic income tax compared to Rs131bn in May 2022, thereby showing a growth of 57pc.
This year has been particularly painful. First the political uncertainty from the change of government in Islamabad, which led to a freefall in financial markets, compromised earnings and hence tax payments as well.
Then the floods wiped off almost half of GDP growth expected for the ongoing fiscal year, severely restricting the capacity of individuals as well as businesses to function, earn and also pay taxes. And one reason the government can justify the extension of the date for filing returns is the inability of a lot of people to do so as their homes and workplaces remain under 5-6 feet of stagnant water.
There is a relatively strong consensus that effective enforcement can lead to more tax revenue. Weak enforcement ranges from a property tax collector taking a bribe to not enforcing the tax, or a just a simple lack of capacity of the tax authority.
We are living in technology era; enhancing enforcement requires Pakistan hire better and technologically trained staff that has access to the right technology and resources.Tax collectors need to be effectively incentivized to fully and fairly enforce taxes. Increasing taxation is possibly the most fundamental challenge Pakistan faces today, not only to adequately finance public investment and services, but also to establish a fairer society. To do so, it is useful to bridge the gap between research and policymaking by integrating research findings into policy decisions.
Increasing taxation is possibly the most fundamental challenge Pakistan faces today, not only to adequately finance public investment and services, but also to establish a fairer society. To do so, it is useful to bridge the gap between research and policymaking by integrating research findings into policy decisions.
