Meager growth in revenue collection

The revenue collection saw a small growth of 3.9 per cent year-on-year in 2019-20 mainly due to the lockdown and a sharp deceleration in economic activity since the coronavirus outbreak. The highest fall in collection was observed in the months of April, dropped by 16 percent and May 30.8percent from last year. In June, the quantum of decline lessened to 12 percent as the government further relaxed the lockdown and revenue collection reached Rs415billion during the month, compared to Rs472billion in the same period last year.
Last year’s collection in June also includes the one-time receipt of Rs50billion from the tax amnesty scheme. The revised revenue target for outgoing June was Rs398billion. Provisional data show that the Federal Board of Revenue has collected Rs3.967 trillion between June and July, as against Rs3.826tillion received in fiscal year 2019, showing an increase of 3.9percent.The revised annual revenue collection target for the FBR was Rs3.908 trillion.
The International Monetary Fund (IMF) had revised the revenue collection target for the third time to Rs3.908trillion from Rs4.8trillion – a reduction of Rs892 billion – due to the sharp economic deceleration after Covid-19.On average, the FBR estimates that revenue collection fell by Rs223billion per month after the outbreak of coronavirus. In the pre Covid-19 period, the FBR missed tax collection target for July-February financial year 2020 by a whopping Rs484billion and received Rs2.725triillion during this period, as against the benchmark of Rs3.209trillion.However, revenue increased 16.35 percent compared to Rs2.342trillion collected during the same period of the last fiscal year. To alter the shortfalls surged in the pre Covid-19 period, earlier the IMF had reduced revenue target to Rs4.8trillion, from Rs5.270trillion.
Tax-wise breakdown for fiscal year 2020 showed that customs collections decline by 9percent or Rs60.860billion to reach Rs618.780billion, as against Rs679.640billion in 2018-19. The decline was primarily due to declining imports. Income tax collection seen in at Rs1.484trillion in 2019-20 versus Rs1.424trillion over the last year, showing an increase of 4.2percent or Rs60.058billion.Sales tax on goods rose by 9.3percent or Rs135.738billion to Rs1.597trillion in fiscal year2020, as compared to Rs1.461trillion last year while federal excise duty collection grew by 6.1 percent – Rs14.759billion – to Rs255.687billion, as against Rs240.927billion.The payment of refunds/rebates was at Rs127.849billionn during 2019-20, accelerating by 85.28percent over Rs69.03billion in the preceding year. The highest refunds were given in sales tax, which came in at Rs88.164billion this year, as against Rs21.083billion in fiscal year 2019 On the other hand, income tax refunds fell by 14.4percent to Rs27.635billion, from Rs32.290illion. A decline of 22.percent was observed in the payment of customs rebate which amounted to Rs12.026billion in 2019-20.
The Federal Board of Revenue (FBR) collection in November stood at Rs346 billion, missing the target of Rs348 billion. Nevertheless it registered over 3percent year-on-year growth from Rs335billion collected in the same month last year, provisional data showed. However, the board collected Rs1.686 trillion during the first half (July-November) of this fiscal year exceeding the projected target of Rs1.669trillion by Rs17billion 1.01 percent.
Special Assistant to Prime Minister on Revenue Dr Waqar Masood Khan told that the board was striving to meet monthly targets. However the economy was declining down owing to limited lockdown of economic activities. In November, income tax collection fell short of target by Rs21billion to Rs109billion as against Rs130billion target projected. However, it raised 4percent when compared with Rs105billion raised in the same month last year.
In the meantime the sales tax collection jumped 14percent to Rs173billion in November from Rs152billion in the same month last year. However, the projected target of Rs142billion was increased by over 21 percent. The growth came as a consequence of rise in POL prices, increase in imports and revitalization of economic activities in the month. The federal excise duty (FED) collection dropped 18perent to Rs23billion as against Rs29billion last year. The FED target for November was set at Rs27billion, which was missed by Rs4billion. Additionally customs collection rose 4percent to Rs57billion as against Rs55billion in the corresponding month last year. The forecasted target was Rs49billion for the month under review.
The FBR will possibly book additional revenue after book adjustments and reconciliation. The payment of Rs81billion refunds in the first five months of this fiscal year is an increase of 97 percent over last year’s payment of Rs41billion which suggest a fast acceleration in economic activity leading to improvement of industrial production.
While preparing the budget for the ongoing fiscal year the government had confirmed the International Monetary Fund to raise Rs4.963trillion in fiscal 2021 year against Rs3.989trillion collected in fiscal year 2020.Tax collection is forecasted to remain difficult for third straight year (2021), primarily owing to stagnant economic activities, which no sooner had started recovering from the first than they were hit by the second wave of COVID-19, whose changed variants are now placing new menace around the world. Federal Board of Revenue (FBR) is a federal tax collecting agency and contributes around 64 percent of the total revenue collection in the country.
The FBR did well to record 4 percent growth in collection during the first five months (July-November) of 2020-2021. It collected Rs1, 688 billion during the period under review as compared with Rs1, 623 billion collected in the same period last fiscal year. The tax agency was delegated a collection target of Rs4,963 billion for the tax year 2021 at about 24 percent growth over the last year’s total collection of Rs3,997 billion. It may be seen that the overall economy was slackened due to coronavirus pandemic and revenue collection was no peculiarity. However, the revenue collection growth in the first five months should have been higher due to inflationary increase and GDP growth target for this fiscal year.