Blog

ISLAMABAD:

The federal government has missed the annual tax target of nearly Rs13 trillion by a record margin of around Rs1.2 trillion, as the authorities failed to increase the tax revenues to 10.6% of the size of the economy, despite putting unprecedented additional burden on the people.

The collection, nonetheless, was Rs2.43 trillion or 26% higher than the preceding year, proving independent analysts correct that the government had set a wrong target in the first place that was impossible to achieve without a mini-budget.

The Federal Board of Revenue (FBR) provisionally collected Rs11.73 trillion in the fiscal 2024-25 – falling short of the target by about Rs1.2 trillion, according to its provisional figures, on Monday, the last day of the financial year.

The federal government had given a commitment to the International Monetary Fund (IMF) that it would increase the tax-to-GDP ratio to 10.6% in fiscal 2024-25. However, the ratio remained at little over 10.2% of the GDP, according to the provisional figures compiled till Monday evening.

The shortfall of about Rs1.2 trillion is unprecedented because the government had imposed a record Rs1.3 trillion in additional taxes in the budget. This follows the fiscal year 2019-20, when the economy suffered greatly due to Covid-19 and as a result the target was missioned by a margin of Rs1.6 trillion.

After assuming the office in August last year, FBR Chairman Rashid Langrial had said that the collection through additional measures might not be more than Rs650 billion due to slowdown of the economy, and inflation falling to single digit.

In July last year, former FBR chairman Amjad Zubair Tiwana had said that irrespective of the amount of efforts that the FBR would put in, the annual collection could not exceed Rs11.8 trillion. His prophecy was proven correct.

The government overburdened the salaried class and taxed almost every essential consumable good, including packaged milk, to raise Rs12.97 trillion in taxes.

The FBR had to chase an unrealistic tax target coupled with a slowing economy and falling inflation rate – the three key factors that have overshadowed the 26% increase in the collection from the sluggish economy.

Finance Minister Muhammad Aurangzeb had vowed to achieve the over Rs12.9 trillion target without the need for the mini-budget. He could not succeed, although the government increased petroleum levy rates to record Rs78 per litre to offset the impact of tax shortfall on the primary budget surplus target. At the start of the fiscal year, the petroleum levy rate was Rs60 per litre on petrol and high speed diesel.

The huge shortfall is also far more than what the government had committed to the IMF just in March this year, when the lender lowered the target by Rs640 billion for the full fiscal year. Subsequently, the government further downward revised the target to Rs11.9 trillion in June, which was missed, too.

Prime Minister Shehbaz Sharif has been personally focusing on the affairs of the FBR and he has tried to introduce many new initiatives, including digital tracking of the economy and focusing on tax evasion prone sectors.

FBR Chairman Langrial also got more fiscal incentives for his workforce, including giving them new 1,300 cc cars and additional one to four monthly salaries.

The federal government approved Rs55 billion worth of two projects for the FBR to strengthen its workforce, set up new custom posts along the Indus River to curb smuggling and upgrade digital infrastructure. The tax authorities said that the results of all these initiatives would be visible in the new fiscal year.

Langrial also vowed to take affidavits from chief finance officers of the companies to check under declaration of the sales and to collect more revenues from the businesses and the people, including the richest people of Pakistan. However, all such initiatives did not help reach the goal.

Also, the government could not meet the commitment to collect Rs50 billion in income taxes from the retailers under the Tajir Dost Scheme. The collection could not even reach Rs50 million.

For the new fiscal year, the government has set the Rs14.13 trillion worth tax target for the FBR, which requires 20% growth in collection over the last fiscal year’s revenues.

For the month of June, the FBR’s target was Rs1.67 trillion. However, despite taking advances and slowing refunds, it could collect Rs1.49 trillion, falling short of the target by about Rs180 billion.

The IMF compelled the country to impose new taxes, primarily burdening the salaried class and levying taxes on nearly all consumable goods, including medical tests, stationery, vegetables, and children’s milk.

Tax collection breakup

The FBR missed its targets for sales tax, federal excise duty, and customs duty but again exceeded the income tax target on the back of over burdening the salaried class.

According to the details, income tax collection amounted to nearly Rs5.8 trillion, Rs340 billion more than the target. It was also Rs1.25 trillion more than the last year. The burden was shared by the salaried class and the corporate sector, as the retailers and landlords still remained under-taxed.

Sales tax collection stood at Rs3.9 trillion, nearly Rs1.03 trillion less than the target of over Rs4.9 trillion. The sales tax remained the most difficult area for the FBR and one of the reasons for low collection was less than estimated growth in large industries. The government had immensely increased the sales tax burden in the budget. The collection was Rs812 billion more than the last year.

The FBR collected Rs767 billion in the federal excise duty, Rs187 billion less than the target. But it was Rs190 billion higher than the last year. The government did not spare homes, lubricants, fruit juices, cement, sugar etc from imposing the excise duty in the last budget. Yet it miserably failed to achieve the target.

Custom duty collection stood at Rs1.28 trillion, Rs315 billion below the target. The collection was hit by lower-than projected import volumes. It was Rs173 billion more than the last year. The FBR paid Rs493 billion in tax refunds, which were Rs13 billion more than the preceding year.

LAHORE:

Opposition lawmakers in the Punjab Assembly on Monday staged a vociferous protest outside the provincial legislature after four of their members were removed from standing committee chairmanships through no-confidence motions.

The four opposition MPAs – Ansar Iqbal (under suspension), who was chairperson of the Standing Committee on Literacy and Non-Formal Basic Education; Rai Muhammad Murtaza Iqbal (under suspension), chairperson of the Standing Committee on Management and Professional Development; Saima Kanwal (under suspension), chairperson of the Standing Committee on Special Education and Muhammad Ahsan Ali, chairperson of the Standing Committee on Colonies – were officially removed from their posts.

The Punjab Assembly adopted the respective motions for their ouster.

The decisions were finalised during meetings of the respective standing committees held on Monday, where the motions for removal were discussed and voted on.

As proceedings began in the House, treasury lawmakers welcomed the removals, applauding the move as a necessary corrective. Government legislators framed the action as a step toward reinforcing parliamentary decorum and curbing the opposition’s disrespectful and disruptive conduct.

PML-N MPA Amjad Ali Javed said that Punjab Assembly Speaker Malik Muhammad Ahmad Khan had gone out of his way to accommodate the opposition, despite repeated provocations. “The speaker has upheld democratic traditions in the House … traditions that had long been missing,” he said.

Outside the assembly building, Opposition Leader Malik Ahmad Khan Bhachar condemned the dismissals and said the House was being run not in accordance with the law but at the whim of a single family.

He questioned the rationale behind suspending only 26 MPAs over their protest during Chief Minister Maryam Nawaz’s speech. “Why only 26? We all protested. We all should have been suspended,” he said.

Bhachar declared that the opposition would not remain silent and vowed to raise their voice on every available forum against what he termed “this injustice”.

He also cast doubt on the neutrality of the speaker, accusing him of running the House in a partisan manner, in violation of established rules.

Opposition lawmakers gathered outside the assembly building, chanting slogans against the PML-N-led government and decrying what they described as undemocratic conduct.

ISLAMABAD:

Prime Minister Shehbaz Sharif on Monday directed the Pakistan Tourism Development Corporation (PTDC) to take immediate and practical steps to promote tourism in the country.

“Public and private sectors should work together to facilitate international tourists’ visits to Pakistan’s tourist destinations,” the prime minister said while chairing a meeting to review efforts for the development of the tourism sector.

He further stressed the need for special measures to boost domestic tourism by encouraging local travelers to explore the country’s recreational sites. He also called for strategic planning to attract long-term investment in the tourism sector.

He said there is vast potential to earn foreign exchange by promoting tourism in the country.

“Almighty has blessed Pakistan with abundant natural resources and timeless beauty,” he remarked, adding that with its snow-capped mountains, lush forests, rivers, plains, deserts, and other natural wonders – especially in the northern areas – Pakistan is in no way behind any other nation in terms of tourism potential.

The prime minister further instructed that Pakistan should be introduced abroad as a tourism brand.

“With cooperation from the provinces, steps should be taken across the country to promote tourism,” he noted, adding that “under the vision for national development, we will make Pakistan one of the leading tourist destinations in the world”.

During the meeting, the prime minister was presented with proposals on how to harness the full potential of Pakistan’s tourism sector.

To promote tourism, steps such as the promotion of northern tourist destinations, medical tourism, and other initiatives can be taken, the meeting was informed.

The meeting was attended by minister for information and broadcasting Attaullah Tarar, minister for railways Hanif Abbasi, Minister for Azad Jammu & Kashmir, and Gilgit Baltistan Affairs Amir Muqam, Minister for National heritage Aurangzeb Kitchi, Advisor to Prime Minister Rana Sanaullah, Special Assistant Huzaifa Rehman and senior government officials.