Pakistan has told the International Monetary Fund (IMF) that it stands to miss its Rs3.1 trillion tax target for the July–September quarter. The authorities of the country now anticipate that actual revenues would be less than Rs2.95 trillion, reports The Express Tribune.
Federal Board of Revenue (FBR) updated the IMF regarding the causes behind the tax shortfall. The main reasons are disruption caused by floods, deceleration in economic activity, and reduced demand for electricity. The FBR, however, is hopeful that growing inflation, expansion of economic growth, and higher imports of solar panels will contribute to bridging the revenue gap.
The discussions were part of ongoing negotiations for the release of a $1 billion loan tranche under the Extended Fund Facility (EFF) and $220 million from the Resilience and Sustainability Facility (RSF).
During the negotiations, the IMF requested information on the FBR’s new revenue targets, the effect of the floods on tax collection, and measures to enhance tax compliance. Officials pointed out that the budget shortfall of more than Rs1.2 trillion of the last fiscal year is a case in point.
On the plus side, customs officials witnessed a 16% rise in collection of import duty in the first two months of the financial year even as regulatory charges decreased. Total imports increased by 9% in terms of dollars.
The FBR also foresees an extra Rs190 billion revenue through enforcement efforts and hopes to have a 10% tax on imports of solar panels from erstwhile FATA areas contribute to total collection tax. Rs6 billion have already been garnered in the initial two months, even though the initial projection was Rs18 billion.
IMF was also informed about Rs1.25 trillion circular debt settlement in the power sector, which was funded through bank borrowings. Nonetheless, the FBR expressed apprehension that declining electricity demand—because of increased prices, the economic slowdown, and policy reforms based on IMF, World Bank, and Energy Ministry proposals—would generate further revenue losses.
