The Federal Board of Revenue (FBR) of Pakistan has experienced a significant decline in revenue collection, with a 16% drop recorded during the four-month period from March to June 2020, compared to the same months last year.
This downturn is attributed to the halt in commercial and business activities due to the lockdown imposed to prevent the spread of the coronavirus pandemic.
During this critical period, the FBR collected Rs1,258 billion, a significant decrease from the Rs1,497 billion collected in the same period of the previous fiscal year. These months are typically crucial for revenue collection due to the fiscal year ending.
Despite the considerable decline in the last four months, the FBR managed to achieve a 4.11% growth in revenue collection for the entire fiscal year 2019/2020. The FBR collected Rs3,996 billion during this fiscal year, compared to Rs3,828 billion in the preceding fiscal year.
One of the major revenue losses was recorded at the customs stage, which saw a 20% decline. Customs duty collection dropped to Rs193 billion during March-June 2020 from Rs241.5 billion in the same period last year. This substantial decrease reflects the significant reduction in import activities due to the lockdown.
Similarly, sales tax collection witnessed a decline of 16%, falling to Rs462.6 billion during the reviewed period from Rs549 billion in the corresponding period of the previous year. The decrease in sales tax revenue is indicative of reduced consumer spending and lower business turnover during the lockdown months.
Federal excise duty collections also suffered, posting a 16.5% decline to Rs84.4 billion during the COVID-19 period, down from Rs100 billion in the same period last year. This reduction further highlights the adverse impact of the pandemic on various sectors of the economy.
The collection of direct taxes was not spared either, with a decline of Rs14.66 billion to Rs518 billion during March-June 2020, compared to Rs607 billion in the same period last year. This decline in direct tax revenue underscores the overall economic slowdown and reduced income levels across the board.
The FBR’s overall revenue collection performance for the fiscal year, despite the decline in the last four months, shows resilience amidst unprecedented challenges. However, the significant losses in customs duty, sales tax, federal excise duty, and direct taxes during the lockdown period reflect the broader economic impact of the pandemic.
As Pakistan moves forward, the FBR and the government will need to implement strategies to recover from these losses and bolster revenue collection in the post-pandemic period. The focus will likely be on revitalizing economic activities and ensuring compliance to stabilize the country’s financial health.
