FBR misses first quarter revenue target by Rs96bn

Government faces tough challenges to meet ambitious FY25 target of Rs12.97tr, may consider additional revenue measures

The Federal Board of Revenue (FBR) has reported a revenue collection of Rs1.1 trillion in September 2024, slightly surpassing its monthly target of Rs1.098 trillion by Rs2 billion. 

This brings the total revenue collection for the first quarter (July-September) of FY25 to Rs2.556 trillion but still falls short of the IMF’s target of Rs2.652 trillion by Rs96 billion, or 3.62%. 

The collection in September reflects a 32% year-over-year increase compared to Rs833 billion collected in the same month last year, offering some optimism for bridging the shortfall from the first two months of the fiscal year, which had seen a combined deficit of Rs 98 billion. 

Despite the September boost, challenges persist as the government has set an ambitious revenue collection target of Rs 12.97 trillion for FY25—over 40% higher than the previous year.

The IMF has cautioned the government that failing to meet its quarterly revenue targets could lead to the need for supplementary revenue measures. With a challenging fiscal environment ahead, the FBR will need to achieve nearly 40% growth over the remaining three quarters (October-June) of the fiscal year to meet the ambitious Rs12.97 trillion target.

In the first quarter, revenue saw a 25% increase compared to the same period last year, amounting to Rs2.041 trillion. The FBR also processed Rs 146 billion in tax refunds in Q1, an increase of 13.17% from Rs129 billion in the same period last year. However, refunds for September 2024 were significantly lower at Rs15 billion, down 59.45% from Rs37 billion in the same month last year.

The government’s revenue target for FY25 hinges on several factors, including GDP growth of 3%, real large-scale manufacturing (LSM) growth of 3.5%, inflation of 12.9%, and real import growth of 16.9%. 

Based on these projections, the FBR expects an automatic tax collection of Rs1.863 trillion. Additionally, the tax measures introduced in the FY25 budget are expected to generate Rs1.345 trillion, while enforcement measures are forecasted to add Rs451 billion in taxes.

Income tax collection showed robust growth, rising 31% in the first quarter to Rs1.225 trillion compared to Rs935 billion during the same period last year. However, given the magnitude of the remaining revenue target for the fiscal year, the government may need to consider additional revenue measures to stay on course.

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