The Federal Board of Revenue (FBR) is gearing up to achieve an ambitious tax collection target of Rs 12.97 trillion for the fiscal year 2024-25, according to the recently released budget documents.
This target represents a significant 40% increase from the estimated Rs 9.252 trillion collection for the outgoing fiscal year 2023-24. Despite challenges such as falling inflation and limited economic resources, the FBR has outlined a strategic approach to meet this staggering target.
Breakdown of the Tax Collection Strategy
The FBR’s strategy involves a balanced approach between direct and indirect taxes. For FY25, the FBR aims to collect Rs 5.512 trillion under direct taxes, a substantial increase from the Rs 3.721 trillion estimated for FY24. This will primarily be achieved through income tax, projected to bring in Rs 5.454 trillion. Additionally, the FBR anticipates collecting Rs 15.662 billion from capital value tax and Rs 16.637 billion from the workers’ welfare fund. The workers’ profit participation fund is expected to contribute another Rs 25.639 billion.
On the indirect taxes front, the FBR targets Rs 7.458 trillion for FY25, compared to the projected Rs 5.531 trillion for FY24. Customs duty is expected to generate Rs 1.591 trillion, while sales tax is projected to be the largest contributor with an estimated Rs 4.919 trillion. Furthermore, federal excise duty is anticipated to yield Rs 948 billion.
Measures to Enhance Tax Collection
To achieve these ambitious targets, the FBR will implement several key measures:
1. Expanding the Tax Base: One of the primary strategies will be to broaden the tax base by identifying and incorporating potential taxpayers who are currently outside the tax net. This includes leveraging technology and data analytics to track and register businesses and individuals who are evading taxes.
2. Enhancing Compliance: The FBR plans to enhance tax compliance through stricter enforcement of tax laws and regulations. This will involve regular audits, stringent penalties for non-compliance, and incentivizing voluntary compliance.
3. Technological Integration: The adoption of advanced technology will play a critical role in streamlining tax collection processes. This includes upgrading the FBR’s IT infrastructure to facilitate efficient tax filing, real-time monitoring, and automated processing of tax returns.
4. Tax Policy Reforms: The FBR is also expected to introduce various tax policy reforms aimed at simplifying tax procedures and reducing the cost of compliance. This could include revising tax slabs, removing exemptions, and implementing uniform tax rates to minimize loopholes and ensure fair tax collection.
5. Public Awareness Campaigns: Increasing public awareness about the importance of tax compliance and the benefits of paying taxes will be crucial. The FBR plans to conduct nationwide campaigns to educate citizens and businesses about their tax obligations and the repercussions of tax evasion.
Addressing Challenges
While the strategy is robust, the FBR will need to address several challenges to meet its FY25 target. The primary challenge is the anticipated decline in inflation, which typically reduces the nominal value of taxable transactions. Additionally, the economic slowdown and limited resources within the economy may hinder tax collection efforts.
However, the FBR remains optimistic. Sources within the organization believe that the concerted efforts to improve tax administration and the strategic measures outlined will help in overcoming these hurdles.
Achieving the Rs 12.97 trillion tax collection target for FY25 is undoubtedly a formidable task for the FBR. However, with a comprehensive strategy focusing on expanding the tax base, enhancing compliance, leveraging technology, implementing policy reforms, and increasing public awareness, the FBR is poised to tackle the challenges head-on and work towards meeting its ambitious goal.