The Federal Board of Revenue (FBR) in Pakistan has faced a significant challenge in the first two months of the fiscal year 2025 (FY25), as it fell short of its projected revenue target by Rs99 billion. This shortfall has raised concerns about the effectiveness of the current tax administration and its ability to meet future financial targets. Provisional figures released by the FBR indicate that the revenue collected in July and August amounted to Rs1.455 trillion, compared to the projected target of Rs1.554 trillion.
Revenue Performance Overview
Despite falling short of the target, the revenue collection in July and August of FY25 did show a growth of 20% compared to the same period in FY24, when Rs1.212 trillion was collected. However, this growth rate is significantly below the 40% increase needed to meet the annual target set by the government. The target for FY25 is Rs12.97 trillion, which is a substantial increase from the FY24 target of Rs9.415 trillion.
| Month | Revenue Collected (FY24) | Revenue Collected (FY25) | Growth Rate | Projected Target for FY25 |
|---|---|---|---|---|
| July | Rs542 billion | Rs659 billion | 22% | Rs670 billion |
| August | Rs670 billion | Rs796 billion | 18.8% | Rs884 billion |
| Total | Rs1.212 trillion | Rs1.455 trillion | 20% | Rs1.554 trillion |
Government Projections and Challenges
In the budget for FY25, the government set an ambitious revenue collection target of Rs12.97 trillion, which represents more than a 40% increase compared to the previous year. The government expects that automation and digitization of the revenue collection process will help achieve this target. Specifically, it has projected that automated revenue collection will reach Rs11.1 trillion in FY25. However, the current pace of growth suggests that significant challenges lie ahead.
In August alone, revenue collection increased by 18.8% year-on-year, reaching Rs796 billion, up from Rs670 billion in the same month last year. While this shows an improvement, the rate is still below the required growth to meet the annual target. Similarly, revenue collection in July recorded a 22% increase compared to the previous year, but this was still not enough to meet expectations.
New Revenue Measures and Enforcement Plans
To address these challenges, the FBR has implemented new revenue measures expected to generate up to Rs2 trillion in FY25. These measures are part of a broader strategy to enhance tax enforcement and compliance. In FY24, the FBR collected Rs9.285 trillion, slightly exceeding the downward-revised target of Rs9.252 trillion but still falling short of the original budgetary target of Rs9.415 trillion.
FBR Chairman Rashid Mahmood Langrial has stated his commitment to improving tax enforcement, which he described as the most challenging task due to the reluctance of certain sectors, such as retail, to enter the tax net. Langrial noted that it would take two to three months to see the results of his measures aimed at increasing revenue. He emphasized the importance of enhancing enforcement, especially in sectors that have traditionally evaded taxation.
Structural Changes and Internal Reforms
To strengthen enforcement and improve revenue collection, the FBR is expected to undergo structural changes. Chairman Langrial has hinted at a reshuffling of tax field formations and key personnel at FBR headquarters. This restructuring aims to bring together a dedicated team that can effectively implement new enforcement strategies.
In a move to reinforce discipline and integrity within the organization, the FBR chairman issued a stern warning to field formations against involving high-ranking officials, especially political figures, in lobbying for lucrative postings. Following this directive, a deputy collector of customs was suspended for three months for violating the order by approaching higher-ups for a posting. This action signals a strict stance against internal corruption and favoritism, aiming to ensure that merit-based appointments drive the tax enforcement efforts.
Outlook and Implications
The shortfall in revenue collection during the first two months of FY25 raises serious concerns about the FBR’s ability to meet its ambitious targets. The government’s reliance on automated systems and stringent enforcement measures will be critical to closing the revenue gap. However, these initiatives will require time to show results, and the FBR will need to navigate internal challenges, such as corruption and resistance from certain sectors, to achieve its goals.
The ongoing efforts to enhance revenue collection are crucial for Pakistan’s economic stability, especially considering the country’s need for development funds and debt servicing. Meeting the revenue targets is not only important for fiscal discipline but also for ensuring the smooth implementation of socio-economic programs. The ability of the FBR to meet these targets will be a key factor in determining the government’s overall economic performance in FY25.
Source DAWN
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