Tax shortfall could lead to curtailment of uplift expenditures

The shortfall in achievement of revenue target of the Federal Board of Revenue (FBR) for 2019-20 will have adverse consequences for the projected fiscal position of the government including curtailment in development expenditures.

According to the mid-year budget review report for the fiscal year (2019-20) submitted to the National Assembly, the revenue target of the Federal Board of Revenue (FBR) for 2019-20 is very challenging, unprecedented and all time high, keeping in view previous year's allocations and actual collections.

The performance of the FBR in the first half of the 2019-20 is very encouraging.

However, in order to achieve the annual revenue target, a lot of effort needs to be made by the tax functionaries.

Though, number of tax filers has reached to around 2.7 million, an increase of almost 40 percent in the first half has been witnessed, which is record high in the history of the FBR. This has enhanced the chances of higher revenue generation, albeit increased enforcement and monitoring measures are required to achieve the annual targets.

Any shortfall in achievement of these targets in tax revenue collection will have adverse consequences for the projected fiscal position of the government.

One of the consequences of falling short on revenue targets would be curtailment in development expenditures.

The review report revealed that the FBR's budget estimates for 2019-20 was Rs 5.5 trillion with direct taxes projections at Rs 2,082 billion and indirect taxes target set at Rs 3,473 billion. During July-December (2019-20), the FBR has been able to collect around Rs 2,093 billion as provisional tax revenue, reflecting a growth of 16.6 percent.

The overall achievement during the first six months has been 95 percent of the target set by the FBR. The report said that the major contributors of income tax are withholding tax, voluntary payments, and collection on demand.

The collection of sales tax during the first six months has increased by 24 percent, collection of federal excise duty (FED) has recorded 29.8 percent growth, while customs duty has registered negative growth of 2.4 percent mainly due to import compression. Some of the reasons for shortfall are unprecedented compression in imports, less consumption of petroleum products, decline in auto and auto-parts sector, less growth in airline sector, overall economic slowdown, and a very challenging and unprecedented revenue target, it added.