Islamabad – The Federal Board of Revenue (FBR) of Pakistan has reported a significant shortfall of Rs 98 billion in tax collections for the first two months of the current fiscal year 2024-25. According to the latest data released by the FBR, the net tax collection stood at Rs 1,456 billion, falling short of the assigned target of Rs 1,554 billion for the period of July to August 2024.
In its statement, the FBR acknowledged the shortfall and detailed its revenue performance. The gross revenue collected by the FBR during July and August 2024 amounted to Rs 1,588 billion. Despite missing the target, there was notable activity in the issuance of refunds, with Rs 132 billion issued to exporters to address liquidity concerns—a 44% increase from the same period last year.
The breakdown of tax collections shows varied performance across different categories. Domestic income tax collection saw a robust increase, reaching Rs 593 billion compared to Rs 437 billion in the same period last year, representing a year-on-year growth of 36%. Similarly, domestic sales tax collections surged by 40% year-on-year, amounting to nearly Rs 314 billion. The Federal Excise Duty (FED) collections also increased by 13%, reaching Rs 86 billion. Overall, domestic tax collections grew by approximately 35%, indicating a strong performance in this segment.
However, the data also highlighted challenges on the import front. The net income tax collection for July-August 2024 was Rs 616 billion, up from Rs 489 billion during the same period in 2023. Net sales tax collections rose to Rs 572 billion from Rs 473 billion, and net customs duty collections increased slightly to Rs 172 billion from Rs 166 billion in the corresponding period of the previous year.
The import sector, however, struggled due to ongoing import compression. In August 2024, the country’s imports declined by 2.2% in US dollar terms and by 7% in Pakistani Rupees compared to August 2023. This reduction was mainly due to a significant decrease in the import of high-duty items, such as vehicles, home appliances, and various consumer goods like garments, fabrics, and footwear. The shift in the import mix has negatively impacted the collection of customs duties and other taxes collected at the import stage.
Despite these challenges, there was a modest 4% increase in customs duty collections. Overall, the FBR’s net tax collection growth registered a 21% increase compared to the previous year, reflecting some resilience in revenue generation despite the import-related setbacks.
Looking ahead, the FBR remains optimistic about achieving its revenue targets for the first quarter of the fiscal year. Economic activities and imports are expected to recover in September, supported by a lower policy rate and various government interventions. The FBR also anticipates a boost in growth due to its 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 tracking, point-of-sale (POS) integration, artificial intelligence-based data analysis, enhanced import scanning, and strict integrity management of the FBR workforce. Additionally, the FBR is revamping its business processes to facilitate business growth and improve ease of doing business in the country.
As the fiscal year progresses, the FBR’s focus on these reforms and policy adjustments is expected to play a crucial role in stabilizing and enhancing tax collection, ultimately contributing to the country’s economic recovery and growth.
