ISLAMABAD: Â Despite the increase in rates of sales tax and federal excise duty through a recent mini-budget, the Federal Board of Revenue (FBR) missed its tax collection target for April 2023 by over Rs100 billion.
The FBR collected Rs483 billion during the month, falling short of the target of Rs586 billion. The FBR issued refunds amounting to Rs26 billion during the month.
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The collection of domestic income tax saw a healthy year-on-year growth of 29%, with Rs190 billion collected compared to Rs147 billion in April 2022. Domestic sales tax collection also surpassed expectations, with a year-on-year growth of 32% and collection of over Rs104 billion. Collection of federal excise duty saw a year-on-year increase of 19%, with almost Rs35 billion collected.
It is worth mentioning that the government increased the rate of general sales tax to 18 percent from 17 percent through a mini-budget or Finance Supplementary Act, 2023, passed in late February 2023. Furthermore, the rates of Federal Excise Duty on beverages and tobacco were also raised sharply.
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On the other hand, FBR claimed that despite slowdown of the economy and the downward revision of the GDP growth rate, the recent collection was still a milestone.
A cumulative growth of almost 29% has been achieved in the collection of domestic taxes.
However, the import side saw a decline in momentum due to unprecedented compression in imports, with imports in the country declining by 65% in April 2023 compared to April 2022. The decline in dutiable imports was even higher at 76%. The import of high duty items such as vehicles, home appliances, as well as miscellaneous consumer goods such as garments, fabrics, and footwear, have drastically reduced, changing the import mix.
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This has impacted the collection of Customs duties and other taxes. Despite a 37% dip in the collection of Customs duties and a 32% decline in overall tax collection at the import stage, the FBR maintained the total tax collection at the previous year’s level with Rs52 billion collected as Customs duty.
With the prevailing economic slowdown and import compression, FBR faces an uphill task in the remaining two months of the financial year.
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Although it has already collected more than Rs5637 billion in the first 10 months of the financial year, it still has to collect almost Rs1800 billion in the remaining months. For this, the FBR is going to put in its best efforts and try to live up to the expectations of the nation, but it must be kept in mind that many economic variables are beyond its control and they have a direct impact on revenue collection.
