ISLAMABAD: The Federal Board of Revenue (FBR) will heavily rely on policy and administrative/ enforcement measures to achieve the assigned revenue collection target of Rs 9.4 trillion during 2023-24.
FBR officials told Business Recorder that the FBR has issued a report on the evidence-based revenue forecasting (2023-24).
The FBR’s autonomous growth forecast (2023-24) revealed that the FBR has estimated 23.7 percent growth in direct taxes collection during 2023-24 by collecting projected revenue of Rs 3,938 billion during current fiscal year.
Dar sets Rs10trn revenue target for Tiwana-led team
The FBR’s report (evidence-based revenue forecasting 2023-24) further revealed that the estimated sales tax collection would be Rs3,410 billion by amassing a projected growth of 28.9 percent.
The FBR has to collect Rs1,224 billion under the head of customs duty with an estimated growth rate of 28.6 percent.
The estimated collection of the Federal Excise Duty (FED) has been projected at Rs427 billion by achieving a growth of 19.9 percent during 2023-24.
The autonomous growth of FBR revenues for FY2023-24 is projected at Rs9,000 billion calculated on the basis of collection figures for 2022-23 translating into a growth of 26.1%. This amount would be further enhanced as a result of policy/ administrative measures to be taken separately.
The report further stated that the FBR revenue collection has shown a steady trend during the last six years as a percentage of GDP.
The Tax-GDP computations were updated due to the rebasing of National Accounts in early 2022. The trend of Tax-GDP ratio over the past six years before and after rebasing of National Accounts remained in the range of 9.6 percent to 11.4 percent; however, due to rebasing a substantial impact has been noted as it plummeted to 9.2 percent during 2021-22 instead of 11.4 percent.
The traditional methodology has been adopted to forecast FBR revenues for FY2023-24. The autonomous growth has been applied on base year’s (FY2022-23) expected collection (Rs. 7,139 billion) for respective taxes, which estimates an increase of Rs. 1,861 billion for FY2023-24. This amount has been added in the expected collection of 2022-23 thus arriving at an estimate of Rs9,000 billion.
During 2023-24, given that the prevailing downturn in economy is reversed, a higher growth rate is expected in FBR revenues, and it is estimated that autonomous growth will reach around Rs. 9,000 billion.
However, this autonomous growth is expected to be further reinforced by policy/ administrative measures to be taken in due course. The FBR taxes are generally buoyant and there is a potential for achieving growth in tax revenues provided that macroeconomic indicators perform well, FBR said.
The FBR collects the Federal level taxes including Direct Taxes (DT), Sales Tax (ST), Federal Excise Duty (FED) and Customs Duties (CD). The methodology for revenue forecasting is based on projections of macroeconomic indicators and tax buoyancy value of each tax.
The buoyancy estimates have been updated as per the rebased National Accounts. The least squares estimator methodology has been adopted for being the most efficient among other methodologies provided in the literature for estimation of buoyancies.
The estimates of relevant macroeconomic indicators are applied on specific tax buoyancy estimates to arrive at the autonomous growth rate for that specific tax.
Tax-wise buoyancy estimates are calculated by using historical tax collection and multiplying with the respective tax base data. In this report the buoyancy estimates have been calculated on the data of tax collection, GDP, large scale manufacturing (LSM) and imports for the years 2002-03 to 2021-2022.
Copyright Business Recorder, 2023