FBR faces Rs386 billion shortfall in revenue

The Federal Board of Revenue missed its revenue collection target by nearly Rs386 billion in the first half of the current fiscal year, as a decline in imports and lower-than-expected inflation impacted tax receipts.

The FBR collected Rs5.623 trillion in taxes between July and December 2024, falling short of the Rs6.009 trillion target. Despite the shortfall, this represents a 26% increase compared to Rs4.466 trillion collected during the same period last year.

The shortfall is mainly attributed to a decline in tax collection from imports, which has been affected by a slowdown in trade, sluggish manufacturing growth, and lower-than-expected inflation, which recently dropped to single digits. In December, FBR collected Rs1.326 trillion, missing the target of Rs1.373 trillion by Rs47 billion. However, this still marked a 35% increase compared to Rs984 billion collected in December 2023.

The government’s ambitious revenue target of Rs12.913 trillion for FY25, which represents a 40% increase from the previous year, is now under pressure. Many experts believe that achieving this target is unlikely due to high expectations and limited expenditure cuts.

In the first half of FY25, the FBR paid Rs273 billion in refunds, marking a 16.66% increase from the previous year. In December alone, refunds amounted to Rs70 billion, significantly higher than the Rs38 billion paid in December 2023.

To reach the targeted revenue, the government plans to generate an additional Rs3.659 trillion through a combination of 3% GDP growth, 3.5% expansion in large-scale manufacturing, 12.9% inflation, and 16.9% growth in imports. Economists estimate that the actual tax collection for FY25 will be around Rs12 trillion.

Income tax collections totaled Rs2.780 trillion, surpassing the target by Rs256 billion, while sales tax collections fell short by Rs380 billion, reaching Rs1.898 trillion.