FBR Current Fiscal Year Tax Collection Update

The ruling government of PTI has recently presented their first historic federal budget for the
financial year 2019-20. The federal government has presented the budget by setting ambitious
tax collection targets to stabilize the faltering economy of Pakistan. Therefore, the government
has imposed many new taxes on the real estate of Pakistan.

Challenging Tax Collection Targets

Government has set an ambitious target of Rs5, 555bn for the Federal Board of Revenue. This
target is almost 25% more from the target set in the previous year.
Many experts have considered the revenue collection target of Rs5.5tr "almost impossible" to
achieve. Moreover, they added that the goal is set in the budget is mainly on the directions of the
IMF. The critics were declaring the failure of PTI government policy due to the introduction of
two mini budgets and a tax amnesty scheme.

Tax Collection Update for First Fiscal Month (July 2019)

Keeping in view the revenue collection target for the fiscal year 2019-20, FBR has previously set
the tax collection target at Rs292 billion for July 2019. However, the FBR has provisionally
collected Rs277 billion in the first fiscal month (July 2019). FBR has witnessed a shortfall of
Rs15 billion.

The FBR collection fetched Rs277 billion in July 2019 that is Rs26 billion more in comparison
to the last year. The revenue collected in the previous year was Rs251 billion.
However, to achieve a quarterly target of Rs1072 billion under the IMF program, FBR has
planned to collect Rs795 billion in the next two months (August and September).

The success of this program depends upon many factors. The performance of FBR in collecting
revenue targets, especially in the first quarter (July-Sept) will set the stage for approving the next
tranche under 39 months Extended Fund Facility (EFF) of the IMF.

FBR and Tax Amnesty Scheme

FBR has collected Rs.14 billion through Tax Amnesty Scheme in July 2019 against Rs34 billion
in the same month of the last financial year. The overall collection of amnesty scheme went up to
Rs57 billion, as FBR has also collected Rs43.7 billion through amnesty scheme in June 2019.
Indeed, FBR is expecting that another Rs13bn will be soon deposited with late surcharges during
the current fiscal year.

A top official of the FBR said the revenue collection on the domestic front in the shape of GST,
Income Tax, and FED had performed well in the first months of the current fiscal year.

Tax Collection Update for Second Fiscal Month (August 2019)

Same like in the case of July, the Federal Board of Revenue has missed revenue collection target
by a significant margin of Rs50 billion for August.

FBR faces revenue shortfall in the second month of the new fiscal year, despite introducing
different taxes and administrative measures in the last budget.

This shortfall of Rs50bn is in addition to the one recorded in the first month of the current fiscal
year (Rs14bn in July), now taking the total gap in revenue collection to Rs64bn. This is the total
shortfall of the current fiscal year in just two months.

FBR has provisionally collected Rs297.4Bn against the projected target of Rs352bn for August
2019. This tax collection is much below the expectations of government given their claims to
make records in this matter.

However, the FBR Chairman Shabbar Zaidi has recently appreciated the FBR results in revenue
collection. He has recently posted on Twitter said, "FBR's target for FY2019-20 has been
achieved to the extent of 90 percent. FBR has achieved 580 billion against the target of 644
billion."

It is essential to mention here that due to a record shortfall in the revenue collections, PM Imran
Khan removed the then FBR chairman in May 2019. Mr. Khan has appointed Shabbar Zaidi as
the Chairman of FBR on May 10 to achieve the challenging revenue target of Rs5.55 trillion.

TAX Collection Details

More details of tax collection in August are:
· The customs collection target in August was set to Rs65bn, which is fallen short of goal by
Rs13bn. The total amount collected is Rs52bn.
· If we compare this collection with last year's figures, the custom collections are down by
1.88pc. Last year it was Rs53bn.
· FBR collection fetched to Rs250bn against the target of Rs287bn, in sales tax, income tax, and
federal excise duty (FED). This collection indicates a decline of 12.58pc or Rs37bn short of the
target.
· The income tax collection target projected for the month was Rs110bn, and in spite of an
increase in the collection to Rs92bn, it is still Rs18bn or 16.36pc short.
· A decline of Rs17bn or 10.75pc short of the target is recorded in Sale tax collection. As the
target set was Rs158bn and FBR succeeded to achieve is Rs141bn only.
· Similarly, the FED collections indicated a decline of Rs2bn or 10.5pc short of the target. FBR
has collected Rs17bn as against the target of Rs19bn.

However, some improvements are also noted in August this year. Such as the increase in Inland
Revenue Tax, this was Rs110bn in August 2018, now increased to Rs152bn in August 2019.

September, FBR, and IMF

The FBR first quarterly target (July to Sep) under the IMF program is set to Rs1072 billion. FBR
has achieved 580 billion in the first two months of the current fiscal year. It means FBR will
have to collect Rs492 billion in September 2019 to display the committed revenue collection
target to IMF.

By analyzing the ongoing pace of collection, it is an uphill task to meet the assigned revenue
collection target of Rs492 billion in the next month. However, FBR is hopeful that the bulk of
tax amounts would be deposited in September so that revenue collection would improve.

We also suggest that FBR would have to improve its valuation system. And it is also needed to
control smuggling to augment the revenue collection in the remaining months of the current
fiscal year.