The Federal Board of Revenue (FBR) collected Rs5.35 trillion in taxes in 11 months of the current fiscal year, leaving it with the task of collecting another Rs750 billion in June to achieve the revised target that had been set after the mini budget.

The FBR generated Rs5.35 trillion in taxes during July-May of current fiscal year (2021-22), an increase of nearly 28.4% over the collection made during the same period of previous year, according to an official statement.

In absolute terms, the collection was Rs1.18 trillion more than the previous year.

The previous government of Pakistan Tehreek-e-Insaf (PTI) had agreed with the International Monetary Fund (IMF) to collect Rs6.1 trillion during the outgoing fiscal year and also imposed Rs360 billion worth of new taxes in the mini-budget.

The FBR on Tuesday removed Chief Collector Customs North Zone Asghar Khan, who is the brother of former secretary to the PM Azam Khan. In his place, Ali Raza Hunjra has been posted as the new chief collector.

The FBR missed the revised tax target of Rs511 billion for May by Rs21 billion. It collected Rs490 billion with a growth of over 28.5%.

The FBR said that it sustained Rs45 billion in revenue loss due to the abolition of sales tax on all petroleum products last month.

The tax department missed at least six monthly targets. The previous management kept the first half targets low and then it did not officially revised the second half targets despite an upward adjustment in the annual target after the mini-budget.

The PTI government had imposed 17% GST on hundreds of items, including food products and restaurants, that fuelled inflation.

Tax authorities now need to collect Rs750 billion in June for achieving the target at an average of Rs25 billion a day.

In June last year, the FBR collected Rs582 billion and it now needs to maintain the existing growth rate of around 29% to collect Rs750 billion.

Any shortfall will also make next year’s tax target challenging, as the IMF has asked Pakistan to fix the target at around Rs7.2 trillion for fiscal year 2022-23.

There has not yet been any agreement between Pakistan and the IMF on how to reach the Rs7.2 trillion mark, as Finance Minister Miftah Ismail is not willing to increase tax burden on the salaried class and he also rejected the proposal to impose one-time capital value tax on the stock market capitalisation.

The FBR’s performance remained largely dependent on imports that contributed over 52% to the total tax collection, which throughout the fiscal year camouflaged the weaknesses in the domestic sales tax collection that remained negative.

Overall, the FBR collected 64.5%, or Rs3.44 trillion, in indirect taxes – general sales tax, customs duty and federal excise duty, which were the three main sources of indirect taxes. Similarly, Rs2.8 trillion, or 52% of the total collection, was at the import stage.

The FBR collected nearly Rs1.9 trillion in income tax in the first 11 months of current fiscal year, up Rs416 billion, or 28%, over the same period of previous year.

The FBR also recorded 28% growth in sales tax collection in the July-May period due to heavy reliance on import taxes. It collected nearly Rs2.3 trillion in sales tax, up Rs503 billion.

The total increase in sales tax collection was once again lower than the jump in sales tax receipts at the import stage due to the negative growth in domestic sales tax collection.

The FBR collected Rs644 billion in domestic sales tax compared with Rs741 billion in the previous year, a reduction of 13%.

The constant negative growth in domestic sales tax challenges the traditional theory that revenue collection should increase proportionately to the nominal GDP growth rate.

Contrary to that, the sales tax collection at the import stage stood at Rs1.63 trillion in the first 11 months of current fiscal year against Rs1.04 trillion in the previous year. There was an increase of over Rs600 billion (or 58%) in sales tax collection at the import stage.

The federal excise duty collection amounted to Rs288 billion, which was higher by Rs36 billion than the corresponding period of previous year.

The customs duty collection increased to Rs885 billion, showing an increase of Rs225 billion, or 34%.

The tax refunds disbursed during May 2022 stood at Rs30.4 billion while in May 2021 the refunds were Rs21 billion, registering an increase of 44.3%.

Similarly, refunds worth Rs295.5 billion have been disbursed during the outgoing fiscal year compared to Rs224.2 billion last year, showing an increase of 31.8%, according to the FBR.

The story was filed by the News Desk. The Desk can be reached at info@thecorrespondent.com.pk.

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