Import compression: FBR suffers revenue loss of Rs 56 billion on every billion dollar

The Federal Board of Revenue (FBR) has suffered massive revenue loss of Rs 56 billion on every billion dollar of import compression. According to the FBR, the tax collection in first six months of 2019-20 is Rs 2083 billion which is 16.3% higher than last year. It is the highest growth rate since 2015-16 and the FBR has made great efforts to attain this growth despite rather subdued economic activity.

The original target of Rs 2367 billion was revised to Rs 2197 billion in view of import compression in first quarter. The trend has continued for the second quarter. This compression of over 5 billion dollars has on one hand improved Current Account situation but on the other hand has adversely affected the usual revenue resources of the government.

An estimated loss of Rs 56 billion of taxes is incurred on every billion dollar of import compression. FBR has redoubled its efforts on domestic side and has managed to shift its tax dependence on import taxes from 56% to a little above 40% this year.

With expected upturn of economic activity in last six months and a likely stabilisation of imports, it is expected that FBR is going to collect an unprecedented amount of taxes this year without disrupting and distorting economic activity, FBR added.