FBR records tax-to-GDP ratio at 9pc for 2023-24

ISLAMABAD: The FBR’s tax to GDP ratio stands at 9 percent for the last fiscal year 2023-24 ended on June 30, 2024.

The Evidence Based Revenue Forecasting Report for 2024-25 published by the FBR stated that the trend of Tax-GDP Ratio remained in the range of 8.7 percent to 9.2 percent. Last year the Tax–GDP Ratio was 8.5 percent however, during the fiscal year 2023-24 (on the basis of Quarter 1 data) it has started improving and stands at 9.0 percent of GDP.

The FBR revenue target for FY2024-25, without budgetary measures is projected at Rs11,174 (billion). The projected target is 20.8 percent higher than the expected collection of Rs9,252 billion for FY2023-24. In shape of Direct Taxes, the FBR is projecting revenue collection of Rs4.586 trillion in shape of Direct Taxes, Rs4.327 trillion as Sales Tax, Rs0.70 trillion as Federal Excise Duty and Rs1.559 trillion as Customs Duty without revenue measures. In this report there is no mention of taxation measures approved by Parliament for the budget 2024-25. The taxation measures taken by the government are estimated to generate Rs1.8 trillion (to be exact Rs1.796 trillion) in the budget for 2024-25.

The FBR’s report says that the growth trend of FBR collection over the past five years’ period FY2019 to FY2023 shows an increasing trend except FY2019 wherein collection fell by negative (0.4) percent. However, in the following years revenue growth started picking up. The collection crossed Rs7 trillion mark for the first time in the country’s history during FY2023. The FBR’s provisional collection stands at Rs9.3 trillion in the current fiscal year in accordance with provisional figures.

However, the report says that during the fiscal year period from July-March FY2023-24 the FBR revenue collection grew substantially i.e. by 30.2 percent, when compared with the corresponding period of PFY. All tax heads have recorded a positive growth.

The traditional methodology has been adopted to forecast FBR revenues for FY2024-25. The autonomous growth has been applied on base year FY2023-24. An increase of Rs1,922 billion is forecast for FY2024-25, thus arriving at expected revenue collection of Rs11,174 billion.

In the conclusion, the FBR report states that the revenue forecasting for FY2025 is estimated at Rs11.17 trillion without budgetary measures. Most of the FBR taxes are buoyant and are positively correlated with actual variations in macroeconomic indicators used in the forecasting model. Hence, there is potential for achieving growth in tax revenues, provided that macroeconomic indicators perform well. With the improvement in local and global economic conditions, the tax revenues are expected to increase accordingly. Similarly, removing import restrictions further, the tax collection at import stage shall improve as well.