Is Pakistan going to miss tax collection target for FY23?

The FBR has to cover a massive gap of Rs1,446 in June

ISLAMABAD (Web Desk) – Pakistan may not be able to meet the annual tax collection target for the ongoing fiscal year as there is a gap of Rs1,446 billion that must be covered by the June end. Tax collection during the July-May period of the year 2023-24 clocks in at Rs6.194.

Given a target of Rs7.64 trillion for the year 2023-24, the Federal Board of Revenue (FBR) could only manage Rs572bn in taxes during May. However, the premier tax collection agency is yet to release the latest official figures.

The news comes as the International Monetary Fund (IMF) is persistently demanding the government to meet the agreed figures about tax collection as well as external financing. It means the FBR’s poor performance can widen the budget deficit.

And the government could face a huge challenge to prepare the upcoming budget given the statement given by IMF Mission Chief Nathan Porter’s recent statement and the resultant reaction by Minister of State Dr Ayesha Ghaus Pasha.

“We take note of recent political developments, and while we don't comment on domestic politics, we do hope that a peaceful way forward is found in line with the Constitution and the rule of law,” Porter said in a statement on Tuesday.

But Dr Pasha on Wednesday censured the IMF over its “interference” in Pakistan's internal matters, describing it “extraordinary”. Pakistan’s conduct was in line with the law, the state minister said.

However, Dr Pasha confirmed that Prime Minister Shehbaz Sharif contacted IMF Managing Director Kristalina Georgieva and assured her that Pakistan would meet all the obligations.

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When asked about Pakistan’s plan of action in case it fails to convince the fund before the expiry of the programme on June 30, she said the finance ministry was not sitting with its eyes closed.

“There is always a Plan B but out priority is to revive the IMF programme,” Dr Pasha said, adding that the delay in agreement was not in the interests of both Pakistan and the IMF.

The world’s top lender allowed Pakistan to give targeted subsidy to the poor, she said, explaining the government stance.

It's important to note that the shortfall comes despite the fact that the government had slapped additional taxes of Rs170bn through a mini-budget.