The Federal Board of Revenue (FBR) missed its collection target for December by almost 24 percent, or Rs225 billion, after exceeding projections in the first five months of the current fiscal year. This was due to a sharp decline in imports as well as a delay in collecting super tax from the majority of taxpayers. Moreover, Finance Minister Ishaq Dar has so far failed to deliver on his promises to restore the economy and provide assistance to the people. His gamble on the IMF’s ninth instalment and the subsequent inflows do not inspire market confidence. The experiences of 2022 highlight the importance of addressing the country’s structural shortcomings, which include a restricted base of foreign exchange revenues and meagre inflows of foreign investment.
A concerted effort is required to stimulate increased localization of the manufacturing base, as well as to reduce the economy’s energy intensity through energy efficiency and conservation. The government anticipates collecting Rs60 billion under the flood levy at the import stage as part of generating non-tax revenue in the second half of 2022-2023. This sum will be reduced in order to make up for any shortfall in the petroleum development levy. This tax will be collected by the FBR on behalf of the federal government and will not go into the pool that can be divided.
In the first half year of 2023, the FBR issued refunds of Rs176 billion, an increase of 18 percent over Rs149 billion in the previous year. Exporters have been complaining about delayed reimbursements and rebates over the past few months. Because letters of credit were not opened during the first half of the year, imports dramatically decreased, according to FBR officials. Due to the government’s import compression strategy, a significant decline was seen in a few key revenue generators, including autos, other machinery, and other goods. Nearly 50% of the total income collected comes from the collection at the import stage. Between Rs30 billion and Rs50 billion in lost income are collected at the import stage each month. In the upcoming months, the contractionary policy will have an even greater influence on tax collection.