Karachi, September 5, 2024 – The Federal Board of Revenue (FBR) is contemplating a halt on tax refunds for the month of September 2024 in a bid to meet its ambitious tax collection targets, sources said.
This move comes in the wake of a significant shortfall in revenue during the first two months of the current fiscal year.
According to sources within the FBR, the national tax agency missed its collection target by Rs 98 billion for July and August 2024. The net collection during this period amounted to Rs 1,456 billion, falling short of the target of Rs 1,554 billion. A substantial portion of this shortfall has been attributed to the issuance of tax refunds, which surged during these two months.
The FBR disbursed refunds totaling Rs 132 billion during July and August of the current fiscal year, marking a 44% increase compared to Rs 92 billion issued during the same period last year. Insiders noted that the outgoing FBR chairman authorized these substantial refunds prior to his resignation. However, the FBR is legally obligated to issue refunds to taxpayers, a duty that has now placed additional strain on the agency’s revenue targets.
In light of the revenue shortfall, the FBR may suspend further refunds to ensure it meets the monthly and quarterly tax targets for the quarter ending September 30, 2024. Failure to achieve these targets could lead to an increase in tax rates for the remainder of the fiscal year, as the government seeks to cover the deficit.
Meeting the revenue collection goals is crucial for Pakistan to secure a $7 billion bailout package from the International Monetary Fund (IMF). The suspension of refunds, while controversial, may be seen as a necessary step to align with the IMF’s stringent fiscal requirements.
As the FBR navigates this challenging fiscal landscape, the decision to pause refunds could have far-reaching implications for businesses and taxpayers, potentially leading to delays in receiving due payments and impacting cash flow for many. The coming weeks will be critical as the FBR strives to balance its legal obligations with the pressing need to meet fiscal targets.
