FBR falls short of February target by Rs 33 billion

The Federal Board of Revenue (FBR) reported a provisional collection of Rs 681 billion for February 2024, falling Rs 33 billion short of the month's Rs 714 billion target, equivalent to a 4.6% shortfall. 

The tax collection target for February 2024 was anticipated at Rs 714 billion, but the target was Rs 681 billion, leading to a Rs 33 billion deficit. 

This follows a Rs 9 billion shortfall in January 2024, marking the second consecutive month of missed targets this fiscal year.

However, the revenue collected in February 2024 saw a 32% rise from the same month in the previous year, moving from Rs 519 billion in February 2023 to Rs 681 billion.

The government has prepared eight backup revenue plans to raise an additional Rs 18 billion monthly, if FBR's revenue does not meet expectations during 2023-24.

FBR exceeded its eight-month collection target of Rs 5.83 trillion, showcasing a 30% increase primarily due to stronger performance in the earlier months of the fiscal year. 

As the fiscal year progresses, the tax authority remains under pressure to meet its annual target of Rs 9.415 trillion.

Despite setbacks, there was an increase in income tax collection by 41%, amounting to Rs 2.76 trillion in the first eight months.

However, sales tax and customs duties collections have been identified as weak areas needing improvement.

Tax filing plunges 

In a relevant development, the number of income tax return filers in the country has seen a significant decrease of 35% or 2.1 million in February, falling to just under 3.9 million compared to the previous tax year.

The tax authority added 840,000 new filers this year, demonstrating some progress despite the overall decline.

This reduction in filers spans across companies, associations of persons, business individuals, and the salaried class, highlighting widespread challenges in tax collection efforts.

The interim government had outlined ambitions to increase the number of tax filers to 6.5 million by June 2024, as per commitments made to the International Monetary Fund (IMF).

Efforts included the establishment of district tax offices to broaden the tax base. However, the actual figures as of the end of February show a stark shortfall, with only 3.88 million tax returns filed, indicating a failure to meet these targets.

Despite earlier attempts to reform the FBR and enhance tax compliance, the interim government faced hurdles in implementing measures against non-compliant sectors, such as the retail industry and mobile phone users who fail to file tax returns.

The challenges included proposed but unimplemented taxes on retailers and the suspension of mobile phone connections for non-filers. These unexecuted initiatives reflect the difficulties in expanding the tax net and enforcing compliance.