ISLAMABAD - The economic managers of the country might struggle to control the soaring budget deficit due to the massive shortfall in tax collection during eight months of the current fiscal year.

The Federal Board of Revenue (FBR) has faced massive shortfall of Rs230 billion in tax collection during July to February period of the year 2018-19 despite introducing mini budgets. The FBR had collected Rs2335 billion during eight months (July to February) of the ongoing financial year as against the target of Rs 2,565 billion. The FBR has provisionally collected Rs 275 billion in February 2018 as against the target of Rs314 billion, an official of the FBR informed The Nation.

He further informed that there are provisional figures and the tax collection might increase when the figures would be finalied. The FBR is struggling to achieve the annual tax collection target of Rs4398 billion during ongoing fiscal year despite introducing two mini budgets. Last month, the FBR had requested the government to revise downwards the tax collection target after facing massive shortfall. However, the Finance Minister Asad Umar reportedly had turned down the FBR’s request by not downward revising the target.

In September 2018, the PTI led coalition government had downward revised the tax collection target by Rs37 billion for the ongoing fiscal year 2018-19 despite taking additional taxation measures. The previous PML-N government had set the tax collection target for Federal Board of Revenue (FBR) at Rs4435 billion for the current financial year. However, the PTI government had downward revised the target to Rs4398 billion despite introducing additional taxation measures. The government is still struggling to achieve the target despite downward revising it.

The FBR blamed the government’s incentives policies responsible for the massive shortfall in tax collection during July to February period of the year 2018-19. According to the FBR, reasons for massive decline in tax collection are tax incentives on salaries given by last government, telecom tax suspended by the Supreme Court of Pakistan, reduced tax rates on POL products and slowdown of development programme in the country. An official said that tax incentives on salaries given by the last government and telecom tax suspended by the Supreme Court of Pakistan had caused revenue losses of over Rs50 billion so far. Similarly, reduced tax rate on oil products had also caused loss of Rs70 billion.

The massive shortfall in tax collection would broaden the budget deficit of the country. Pakistan had already recorded higher budget deficit of one trillion rupees in just six months. The country’s expenditures stood at Rs3.36 trillion as against the revenues of Rs2.33 trillion during the first half (July to December) of the ongoing fiscal (FY2019) year. The budget deficit was recorded at Rs1.03 trillion (2.7 percent of the GDP), according to the latest data of ministry of finance. The government is struggling to restrict the budget deficit despite introducing two mini budgets in last six months.

The government had upward projected the budget deficit to 6.3 percent of the GDP (Rs2.39 trillion) for the ongoing fiscal year as against the target of 5.1 percent of the GDP.

Some of the economic experts believed that budget deficit might go beyond 6.5 percent of the GDP keeping in view the current trend of tax collection and increasing expenditures.

“The slight increase in fiscal deficit for the first half of FY19 is a reflection of higher interest payments on loans taken out by previous governments and increased security needs,” said Minister of State for Revenue Hammad Azhar on his social media account last week. He further said that revenues have been slower than expected due to the unnecessary concessions doled out by the PML-N govt in its last budget (net -100 billion).