The Chairman Federal Board of Revenue (FBR) Rashid Mahmood Langrial has attributed revenue shortfall in the first half of FY25 to lower-than-expected autonomous growth, driven by exchange rate stability, subdued inflation, and sluggish GDP and manufacturing sector growth.
He informed the Senate Standing Committee on Finance that these factors significantly impacted tax collection, leading to a Rs384 billion shortfall between July and December 2024.
Langrial projected that the shortfall could rise to Rs447 billion by February 2025, though he expressed optimism that revenue growth would accelerate in the final four months of the fiscal year, mitigating further losses.
The policy measures introduced in the Finance Act 2024, which were expected to generate Rs1.3 trillion, have also yielded lower-than-expected collections, primarily due to behavioral changes among real estate investors and traders, as well as estimation errors.
For the first half of 2024-25, the revenue loss due to policy measures alone amounted to Rs251 billion, with projections suggesting it could reach Rs539 billion unless corrective measures are taken.
The committee was briefed that the FBR collected Rs5,624 billion in taxes during the first half of the fiscal year, falling short of the Rs6,008 billion target.
Despite the shortfall, the tax-to-GDP ratio has improved, rising from 9.5 percent in the first quarter to 10.8 percent in the second quarter. However, it remains below the IMF’s target of 13.6 percent by the end of the program.
Comparatively, India’s tax-to-GDP ratio stands at 18 percent. The number of registered retailers has increased from 200,000 last year to 600,000 this year, while tax payments with income tax return filings have risen to Rs105 billion.
During the meeting, Senator Mandviwalla criticized the FBR’s reluctance to expand sales tax collection, remarking that despite multiple recommendations, the tax body had opposed collecting sales tax on goods.
Langrial, however, maintained that the FBR’s efforts to boost revenue were reflected in the increasing tax-to-GDP ratio and ongoing policy adjustments.
