FY20 Rs 5.5 trillion target: revenue shortfall to grow to Rs 600 billion

The growth in revenue collection of the Federal Board of Revenue (FBR) is unlikely to go beyond 26 percent given the current trend against 44 percent required to achieve Rs 5.5 trillion tax target for the current fiscal year.

Sources said that the current trend suggests that by the end of fiscal year there would be a shortfall of over Rs 600 billion in FBR revenue collection as total tax collection.

There was a shortfall of Rs 164 billion in FBR revenue collection during July-October (2019-20) as total collection stood at Rs 1,283 billion against the target of Rs 1,447 billion for the first four months of the current fiscal year.

The senior officials of the FBR maintain that the shortfall in revenue collection was primarily because of contraction in imports as more than 31 percent revenue is collected at import stage in the form of customs duty, withholding tax, general sales tax. They point out that there was a contraction of $3 billion in import bill during the first quarter of the current fiscal year (around Rs 506 billion), whose impact on total FBR revenue collection during the first quarter was recorded at Rs 125 billion.

An official of finance ministry said that a shortfall in revenue collection would consequently widen fiscal deficit and may negatively impact on meeting primary deficit target agreed with the International Monetary Fund (IMF) under the $6 billion extended fund facility.

Soon after the advisor on finance Hafeez Shaikh announced Rs5.5 trillion FBR revenue collection target for next fiscal year on May 26, 2019, independent economists termed it unrealistic which would render fiscal deficit projections irrelevant.

A senior official said that "if growth in revenue comes, it would be from service as well as retail and wholesale sectors and the tax authorities are trying to find a middle way. However, the government was banking on CNIC condition to bring retailers and wholesalers into the tax net but so far the government has been unable to implement it.

The government has twice postponed implementation - first for two months and recently for another three months making it effective from February 2020 onwards. It is unclear whether the CNIC condition would be implemented during the remaining five months of the current fiscal year or not.