Tax collection beats target by big margin

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According to the International Monetary Fund (IMF), Pakistan collected Rs2.023 trillion in revenue for the first quarter of the current fiscal year, exceeding the target by a large margin, though challenges remain to broaden the tax base. Tax collection beats target by big margin

According to provisional figures, the Federal Board of Revenue (FBR) collected Rs2.023 trillion during the July-September quarter, against the IMF’s quarterly target of Rs1.977 trillion. In comparison with the IMF’s target, tax receipts were Rs46 billion higher. As a result of higher collections, Pakistani authorities will be able to offset some of their expenditure excess.

Despite Thursday being the last working day of the month, the FBR is expected to announce a formal announcement on Saturday. Over the last fiscal year, the FBR has collected Rs507 billion more in taxes than it did the previous year, an increase of almost 34%. It received revenues of Rs1.51 trillion during the first quarter of the previous year.

It was again difficult for the FBR to ensure that income tax returns were filed in a timely manner. In the two days remaining before the deadline, it has only received 1.6 million annual tax returns. It is not expected that the number will increase dramatically by Saturday, since the FBR received 4.9 million income tax returns last year.

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On Thursday, it announced that it would not grant any extension to the deadline for filing tax returns, and people and companies should fulfill their legal obligations by September 30. The laws are lenient, however, since people can submit their annual wealth. Income tax statements at any time by paying a nominal penalty of Rs1,000.

The low tax collection has remained a chronic issue since taxation has skewed towards indirect methods that hurt poor people the most. In the last fiscal year, the FBR collected Rs7.164 trillion, hardly equivalent to 8.6% of the national economy. The low tax collection was partly due to political patronage of tax-evading sectors like real estate, traders, stock markets, and exporters. Salaried people paid Rs264 billion in taxes in the last fiscal year, while exporters paid just Rs74 billion.

Pakistan has agreed with the IMF to collect Rs9.415 trillion in taxes for the current fiscal year. Indirect taxes, however, make up the majority of taxes.

Dr Shamshad Akhtar, interim finance minister, has proposed taxing agriculture, retail, and real estate, which are highly undertaxed.

The FBR achieved its monthly target for the third consecutive month. In September, it collected Rs815 billion against Rs560 billion in September last year.

The IMF deal has been met for the third consecutive month and other structural and indicative benchmarks have been met. Only income tax and federal excise duty (FED) targets were met out of four types of taxes – income tax, sales tax, federal excise duty, and customs duty.

During the first three months of the current fiscal year, income tax collection increased by Rs324 billion, or 54%. Sales tax and customs duty targets were missed, but income tax collection exceeded the target by Rs145 billion.

Sales tax collections reached Rs722 billion, an increase of Rs102 billion, or 17%, over the previous fiscal year. Due to low growth in import tax receipts, the amount fell by Rs55 billion short of the target.

In FED, the FBR collected Rs128 billion with a growth of 66%. The three-month target was exceeded by Rs13 billion.

By Rs57 billion, customs duty collection fell short of target. FBR received Rs248 billion in customs duty, a 14% increase over last year. Devaluation of the rupee and an increase in commodity prices helped improve collection. However, it fell short of the goal.

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