Mohsin Siddiqui (Chief Reporter)
The Federal Board of Revenue (FBR) is likely to face a significant revenue shortfall of Rs170 billion during the first quarter of the fiscal year 2024-25, which covers the period from July to September 2024.
Despite this anticipated deficit, the FBR is actively implementing a comprehensive strategy aimed at achieving its ambitious revenue collection target of Rs2,652 billion for the same quarter. The shortfall presents a challenge to the government’s broader fiscal goals, but efforts are being made to bridge the gap and enhance tax collection efficiency.
The projected revenue shortfall of Rs170 billion has become a pressing issue for the FBR as it grapples with the financial realities of the current fiscal year. Several factors, including slower-than-expected tax collection and economic challenges, have contributed to the FBR’s inability to meet its initial revenue projections. However, according to senior FBR officials, the revenue authority has already put in place a well-defined strategy to address this shortfall.
The FBR has targeted a revenue collection of Rs2,652 billion for the first quarter of 2024-25, but according to sources within the department, the actual collection is expected to fall between Rs2,480 billion and Rs2,490 billion by the end of September 2024. This leaves a considerable gap that the FBR must fill to meet its overall target for the year.
Despite the projected shortfall, the FBR is confident in its ability to meet the assigned revenue target for the first quarter. A key component of its strategy involves the collection of Rs50 billion in taxes alongside the submission of tax returns. Additionally, the advance tax instalment is due by September 2024, with significant contributions expected from the corporate sector and banks.
The FBR is also taking proactive steps to enhance enforcement and compliance within the tax system. Senior government officials have directed the FBR to draft rules for the promulgation of an Ordinance that will introduce stricter enforcement measures against non-filers and nil-filers. The aim is to increase compliance and improve tax revenue collection from individuals and businesses that have either underreported or failed to file their taxes. These enforcement measures are considered essential for the FBR to meet its annual target of Rs12,915 billion for the fiscal year 2024-25.
improve tax compliance among individuals and businesses, the FBR is also collaborating with provincial governments to establish a comprehensive mechanism for tax collection from farmers. This new initiative is set to begin on January 1, 2025, and will ensure that the agricultural sector, a key part of the national economy, contributes its fair share to the country’s revenue.
Meanwhile, Prime Minister has recently approved the FBR’s transformation plan, which includes several enforcement measures aimed at abolishing the category of non-filers. The plan also focuses on the restructuring of non-registered business entities, ensuring that these businesses are brought into the tax net and comply with the necessary regulations. The FBR is expected to issue new rules soon regarding the change in the definition of non-filers, and a summary has been submitted to the cabinet for placing the Tax Policy Wing under the Ministry of Finance.
The FBR has faced considerable challenges in collecting revenue from key sectors such as retail. So far, it has only been able to collect Rs0.5 million from retailers against a projected target of Rs50 billion. This considerable shortfall in retail tax collection underscores the need for stronger enforcement and better coordination between the FBR and retail businesses to achieve the desired revenue goals.
To strengthen its capacity for effective tax policy formulation and implementation, the FBR is also planning a major reshuffling in the coming days. One of the key changes will involve transferring the Tax Policy Unit to the Ministry of Finance. This move is expected to improve the overall coherence of tax policy and streamline the process of tax collection across various sectors.
Additionally, the government plans to hire individuals from the private sector on management pay scales to further bolster the capabilities of the Tax Policy Unit. These hires will bring in new perspectives and expertise to strengthen the FBR’s ability to meet its ambitious revenue targets for the fiscal year.
The FBR’s efforts to meet the Rs12,915 billion revenue collection target for the entire fiscal year 2024-25 will play a critical role in ensuring Pakistan’s economic stability. The success of this target hinges on a combination of improved enforcement measures, increased tax compliance, and the development of more effective tax collection mechanisms across various sectors of the economy, including agriculture, retail, and corporate entities.
The federal government, in collaboration with provincial authorities, is working on a long-term plan to ensure a more efficient tax system that can sustain the country’s fiscal needs. Key initiatives such as the enforcement of stricter penalties for non-filers, the restructuring of non-registered businesses, and the collection of taxes from previously untapped sectors like agriculture will be crucial for achieving long-term revenue stability.
