Karachi, September 1, 2024 – The Federal Board of Revenue (FBR) expressed optimism on Sunday about meeting its first-quarter revenue collection target for the fiscal year 2024-25, anticipating a rebound in imports driven by lower inflation and a reduced policy rate.
In a statement, the FBR announced that it had missed its revenue collection target for the first two months of the current fiscal year. “Against a target of Rs. 1,554 billion, FBR has collected Rs. 1,456 billion in net revenue, and refunds of Rs. 132 billion (44% more than last year) were issued to exporters to resolve their liquidity problems,” the statement detailed.
The FBR reported gross revenues of Rs. 1,588 billion for July and August 2024. Domestic income tax collection reached Rs. 593 billion, compared to Rs. 437 billion in the same period last year, marking a 36% growth year-on-year. Additionally, domestic sales tax collection showed robust growth, with nearly Rs. 314 billion collected, reflecting a 40% increase from the previous year.
Federal Excise Duty (FED) collections also witnessed an upward trend, amounting to Rs. 86 billion, which is a 13% year-on-year increase. Cumulatively, these figures represent an overall growth of almost 35% in the collection of domestic taxes.
However, the positive momentum in domestic tax collection was not mirrored on the import side, due to a continued contraction in imports. In August 2024, imports in U.S. dollar terms declined by 2.2% compared to August 2023. Similarly, in Pakistani rupee terms, imports in August 2024 showed a 7% decline compared to the same period last year.
The reduction in imports was particularly noticeable in high-duty items such as vehicles, home appliances, and miscellaneous consumer goods like garments, fabrics, and footwear, significantly altering the import mix. This trend adversely affected the collection of customs duties and other taxes collected at the import stage. Despite this, there was a modest 4% increase in customs duty collection, contributing to an overall 21% growth in net revenue collection compared to the previous year.
Despite these challenges, the FBR remains confident about achieving its revenue targets for the first quarter. “FBR is likely to achieve the revenue targets of the first quarter as both the economic activity and imports are expected to show a healthy turnaround in the month of September due to a lower policy rate and other interventions being made by the Government in recent months,” the statement noted.
The FBR also highlighted that its growth prospects are likely to improve significantly as a result of ongoing digitization efforts and reforms, which are being closely monitored by the Prime Minister and the Finance Minister. These reforms include end-to-end monitoring of supply chains, automated production monitoring, point-of-sale (POS) integration, artificial intelligence-based data integration, import scanning, and strict integrity management of the FBR workforce. Additionally, the FBR is revamping its business processes to facilitate business growth and ease.
The strategic focus on reform and digitization is expected to streamline tax collection and compliance, fostering a more robust economic environment. With these initiatives, the FBR aims to enhance transparency and efficiency in revenue collection, ultimately contributing to the country’s economic stability and growth.
As the government continues to implement policies aimed at boosting economic activity and enhancing revenue generation, the FBR’s proactive approach in adjusting to these changes reflects its commitment to achieving its fiscal targets and supporting Pakistan’s economic recovery. The coming months will be critical in determining whether these measures will lead to a sustained improvement in import activity and overall revenue collection.
