$1.1 bn import compression: FBR faces Rs68 bn shortfall in July, August

ISLAMABAD: The Federal Board of Revenue (FBR) faced revenue shortfall of Rs68 billion in July and August mainly because of import compression of $1.1 billion on a monthly basis, The News has learnt.

The FBR used to collect around 38 percent taxes through imports. The FBR’s net collection on account of Customs Duty (CD) stood at Rs49.8 billion against the desired target of Rs65 billion in the first two months (July and August 2019), registering a negative growth so far.

Total Inland Revenue (IR) target was envisaged at Rs286 billion but so far collection stands at Rs250 billion. However, the domestic collection of income tax, sales tax and federal excise duty has fetched Rs152 billion so far in the current fiscal against Rs110 billion in the same period of the last financial year.

In IR, overall growth stood at 26 percent as income tax on domestic stage witnessed surge of 39 percent, sales tax on domestic stage 43 percent and imports 17 percent, Federal Excise Duty (FED) on domestic front 46 percent but zero at import stage.

The IR domestic collection has been facing shortfall of Rs9 billion for August 2019 envisaged target. The FBR high-ups claimed that this revenue shortfall could be bridged through improved administrative efforts but the collection at import stage is negative for all taxes in the last month.

Talking to this correspondent, Chairman FBR Shabbar Zaidi expressed satisfaction over the FBR’s performance for collection of revenues in outgoing month and stated that collection for August 2019 had increased to Rs297 billion and hoped that it would definitely touch Rs298 billion.

“With God blessing, we might touch Rs300 billion,” he added. Shabbar said he was more than satisfied with the collection of August 2019 because he was expecting revenue collection in the range of Rs280 billion because there were 10 holidays during the last month on eve of Eidul Azha.

He said the FBR used to collect Rs15 billion on average per day basis so it impacted our collection massively. He said the FBR collection witnessed double digit growth as policy measures started yielding positive results. He said import compression had caused problems for FBR’s collection as the Board collected around 40 percent revenues at import stage.

He said the FBR arranged commissioners’ conferences six or seven times in last two months in order to streamline the strategy for jacking up revenue collection as much as possible. To another question regarding quarterly target of Rs1,072 billion agreed with the IMF, he said efforts were underway to maximize revenue collection but this collection target was not sacrosanct so adjustments could be made on this front.

He said when imports were on decline, the FBR was devising its strategy to cope with the situation arising on collection front. However, sources said that the economy was on contraction and with negative growth of large scale manufacturing the GDP growth for the last fiscal year would be further revise downward from 3.3 percent to 2.9 percent while inflation had already entered into double digit.

With prevailing scenario, the tax collection has become problematic because the low growth does not allow to jack up revenues in massive way. The tax to GDP ratio, which is already on decline, becomes more difficult so it’s challenging for the FBR to materialize collection of Rs5,550 billion in the current fiscal 2019-20 against Rs3,829 billion in the last fiscal year of 2018-19.