When the Federal Board of Revenue (FBR) released data on tax collection for the first six months of the ongoing year, my immediate thoughts turned to Ishaq Dar. Often hailed as the economic architect behind the success of Nawaz Sharif’s government, Dar found himself in the spotlight for all the wrong reasons during the 16-month tenure of the PDM government. Unfortunately, his efforts to improve the economy went unnoticed at the time, but the results are now coming to fruition.
Ishaq Dar’s critics have often pointed to his reliance on withholding taxes as a crutch. However, the recent data shows that the FBR has made strides in reducing dependence on this method, with the share of withholding taxes falling to as low as 40% in December 2023.
These impressive results are a testament to the hard work and dedication of the FBR’s field formations and top brass. But they followed what Ishaq Dar had set earlier, and in this regard, the FBR chairman, Member of Customs Operations, Member IR- Operations and their teams must be praised for following Ishaq Dar’s path and achieving this “unsurmountable task.”
Of course, the credit also goes to the Pakistani taxpayers themselves, whose cooperation and compliance have been essential to this success. The fact that the FBR has managed to collect over record in taxes in just six months is a cause for celebration, and it is a clear indication that Ishaq Dar’s economic policies are on the right track.
It remains to be seen whether the FBR can sustain this momentum in the coming months, but for now, Pakistanis can take heart from the fact that their economy is in the hands of a proven performer.
According to the provisional data from the FBR, a record Rs 4,468 billion was collected during the first six months (July-December) of 2023-24, surpassing the assigned target of Rs 4,425 billion for the period by Rs 43 billion. The FBR made history by collecting Rs 1,021 billion in December 2023. After adjusting for refunds of Rs 38 billion issued during the month, the net collection reached Rs 984 billion.
Both monthly and six-month targets for the current financial year were exceeded, with the target for the first six months set at Rs 4,425 billion (as agreed with the IMF), surpassing expectations by Rs 43 billion, reaching a total collection of Rs 4,468 billion.
In the corresponding six months of the previous year, the FBR collected Rs 3,428 billion, marking an increase of more than Rs 1 trillion. That time, Ishaq Dar was finance minister. He was struggling with dollar shortage, and depreciation of the local currency.
Side by side, he was trying hard to restore the confidence of industrialist and investors. This achievement is noteworthy despite refunds of Rs 230 billion, compared to Rs 177 billion issued during the corresponding period of the previous year, and persistent import compression.
The FBR highlighted the ongoing contraction in imports as a hindrance to revenue collection at the import stage. The revenue mix at the import stage and domestic taxes, which used to be 50:50, has shifted to 36:64. The FBR has absorbed the impact of import compression by generating more revenues domestically.
The ratio of direct and indirect taxes has changed, with the share of direct taxes increasing to 49% for the first six months. In December alone, the share of direct taxes was recorded at 59%, representing a 41% increase in the first six months compared to the corresponding period of the previous year. Notably, within direct taxes, the FBR has reduced the share of withholding taxes from 70% to 55-58% in overall tax collection over the past two years. In December 2023, the share of withholding taxes dropped to 40%.
It’s worth mentioning that the FBR achieved a milestone by collecting Rs 1 trillion annually back in 2007-08, a feat that took 50 years to accomplish. However, in just 15 years, this remarkable achievement has been replicated in a single month, thanks to the untiring efforts, sheer dedication, and hard work of the field formations and top brass of the FBR.
