FBR faces big revenue deficit in tax collection target

Islamabad

The FBR has faced a massive revenue shortfall in materialising its revised annual tax collection target for outgoing fiscal year ended on June 30, 2017.

According to provisional figures of FBR till midnight on Friday, the tax machinery netted Rs3330 billion so far against revised tax target of Rs3521 billion, witnessing a shortfall to the tune of Rs191 billion even in achieving downward revised target.

The FBR high-ups remained tight lipped till midnight, however, one top official claimed on the condition of anonymity that the tax machinery might collect revenues around Rs3400b. “Till finalisation of FBR’s revenue collection figures, the collection might be further increased by Rs40 to 70b,” added the official sources. The final figure of revenue collection will be available by second week of July this year. However, the FBR is likely to release provisional revenue collection figures today (Saturday) as the tax offices would remain opened till midnight on Friday.

In the wake of massive revenue shortfall, now all hopes for restricting budget deficit have dashed to the ground and now it was expected that the budget deficit would exceed 5 percent of GDP at least for the outgoing fiscal year.

The FBR high-ups believe that the tax incentives on account of POL prices, reduced tax rate for fertilizer and exporters package caused revenue loss to the national exchequer so the government had to revise downward the annual tax target from Rs3621 billion to Rs3521b in the aftermath of holding parleys with the IMF under article IV consultations ahead of budget 2017-18 at Dubai.  These tax incentives coupled with several holidays at the last moment on account of holy month of Ramazan and then Eid holidays also played havoc with the tax collection efforts as the tax official argued that they could not gather desired momentum in the last week of June.

However, independent tax experts say that the over performance of the FBR in last financial year for surpassing its desired target also ploughed the seeds of revenue shortfall from day one because the FBR obtained advances resulting into perpetual shortfall of Rs70 billion from first quarter of the outgoing fiscal year.

The revenue shortfall on account of both FBR and non-tax revenue as well as expenditure overrun in outgoing financial year will certainly exceed the budget deficit as any possibility of sticking to the deficit target of 4.3 percent of GDP seems impossible.  The budget deficit stood at 3.9 percent of GDP for first nine months (July-March) period so restricting the deficit at 4.3 percent of GDP will be simply impossible preposition. In the last decade, the budget deficit in the last quarter of any financial year never remained less than 1.3 percent of GDP so if this formula applies then the budget deficit is going to exceed 5 percent of GDP for the FY2016-17 ended on June 30, 2017.

The budget accounts will be finalised till July 15 to 20, 2017 so then the exact budget deficit will be ascertained, however, keeping in view revenue shortfall the deficit would go up than the envisaged target for this financial year.