Revenue issues


Nobody, not even anybody within PTI (Pakistan Tehreek e Insaf), would be surprised that the original revenue target was missed by a record Rs1.58 trillion, even though the nearly Rs3.981 trillion collection by the end of the fiscal was a little higher than the four-time downward revised target of Rs3.9 trillion. This was the third consecutive year, which include two PTI years, that tax collection could not cross the psychological barrier of Rs4 trillion. And this year is particularly bad because this time the government also paid Rs100 billion tax refunds from the budget for the first time, which effectively amounts to inflating total revenue. There are a number of reasons for this state of affairs.
One, the coronavirus pandemic not just baffled the medical fraternity but also gave a lot of sleepless nights to economic managers all over the world. The shutdowns that practically all countries employed devastated economies, not to mention the fact that a lot of tax collectors, FBR (Federal Board of Revenue) being no exception, lost personnel to the virus. Plus, with businesses shutting down and cumulative earnings dropping significantly, it was only natural for tax collection to take a hit as well. Two, the target was ridiculously high to begin with. It is understandable that the Extended Fund Facility (EFF) with the IMF forces certain decisions upon us, but what really is the rationale of setting a target that everybody knows cannot be achieved? But even the IMF is only partially to blame. We are in the habit of setting targets that are unachievable. Perhaps that explains why no important revenue or expenditure target has ever really been met by our finance ministry.
And three, sheer mismanagement on the part of the government. Even before the pandemic growth was plummeting, inflation was unbearably high, and unemployment was not very far from historic levels. The virus and everything it brought with it only hastened the demise of the economic program. The government made no real effort at all to restructure or, like it likes saying, “revitalise” the FBR – all it really did was replace one FBR head after another – and simply did not realise how unrealistic it was to expect the some inefficient, corrupt machinery to do a stellar job and raise unprecedented revenues. That is why now they are doing all they can to sell the final number as some sort of an achievement, since after all it did cross the target that was set after revising the original one down throughout the fiscal year. Unless the FBR is overhauled, these problems will occur at the same time every year.