FBR expects higher growth in tax collection

ISLAMABAD-The Federal Board of Revenue (FBR) has noted that a higher growth rate is expected in revenue collection and it is estimated that autonomous growth will reach around Rs9,000 billion during the current fiscal year FY 2023-24, given that the prevailing downturn in the economy is reversed.
“This amount would be further enhanced as a result of policy/administrative measures to be taken separately,” said FBR in its “Evidence-Based Revenue Forecasting” report. In the report, the traditional methodology has been adopted to forecast FBR revenues for FY 2023-24. The autonomous growth has been applied on base year’s (FY2022-23) expected collection (Rs. 7,139 billion) for respective taxes, which estimates an increase of Rs. 1,861 billion for FY2023-24. This amount has been added in the expected collection of FY2022-23 thus arriving at an estimate of Rs. 9,000 billion.
It is worth mentioning here that the federal government on the directives of the International Monetary Fund (IMF) has set tax collection target at Rs9.415 trillion for FY24 as against the revised collection of Rs7.2 trillion in FY23, showing an increase of 30 percent. The government hopes to achieve the target based on the projected economic growth of 3.5 percent, average inflation of 21 percent and some revenue measures.
“FBR taxes are generally buoyant and there is a potential for achieving growth in tax revenues provided that macroeconomic indicators perform well,” the report noted.
FBR revenue collection has shown a steady trend during the last six years as a percentage of GDP. The tax-GDP computations were updated due to the rebasing of National Accounts in early 2022. The ratio remained in the range of 9.6 percent to 11.4 percent, however, due to rebasing a substantial impact has been noted as it plummeted to 9.2 percent during FY 2021-22 instead of 11.4 percent.
According to the report, the growth trend of FBR collection over the past five years’ period FY 2017-18 till FY 2021-2022 shows an increasing trend except one year in which the growth was negative. The growth in FY2018-19 was a negative (0.4) percent, however, in the following years it started picking up. In FY2019-20 growth remained 4.4 percent and reached 18.7 percent in FY2020-21 despite Covid-19 related challenges. This upward trajectory continued and particularly during FY2021-22 the growth reached well above the normal range and the federal taxes recorded almost 30% growth. The target was exceeded by Rs. 49 billion. The collection also crossed the 6 trillion mark for the first time in the country’s history. The FBR has estimated 23.7 percent growth in direct taxes collection during 2023-24 by collecting projected revenue of Rs 3,938 billion during the current fiscal year. It has estimated sales tax collection would be Rs3,410 billion by amassing a projected growth of 28.9 percent. The FBR has to collect Rs1,224 billion under the head of customs duty with an estimated growth rate of 28.6 percent. The estimated collection of the Federal Excise Duty (FED) has been projected at Rs427 billion by achieving a growth of 19.9 percent during 2023-24.

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