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EDITORIAL: Bad news continues to flow in for the finance ministry as it turns out that FBR (Federal Board of Revenue) provisionally collected Rs 559 billion in May 2023 against the monthly target of Rs 621 billion, reflecting a Rs62bn shortfall.

That leaves the Board with the target of Rs 1.4 trillion to achieve in June to achieve the increased tax collection target of Rs 7.64 trillion for 2022-23. And, given FBR’s collection trajectory over the last fiscal year, that is all but impossible.

It is also important to note that this shortfall has occurred when the economy is slowing. There are still wide differences between different expectations of the outgoing fiscal year’s GDP growth figure as they range between less than one percent to negative growth. But there is no doubt that the economy has deteriorated significantly over the last six months or so, mainly because of uncertainty of the IMF (International Monetary Fund) programme.

Now there are fears that the Fund will use FBR’s inability to meet its targets as an excuse to put further conditions to reviving the EFF (Extended Fund Facility). And since everybody knows, and the finance ministry has also admitted, that there is no alternative to IMF’s aid for the time being, this puts yet more pressure on the government at a very crucial time.

So far FBR has not released official figures or statements, but chatter has made its way to the press that it has suffered a massive shortfall of Rs 400 billion during 2022-23. So far, it is known that it collected Rs 6.2 trillion in the first seven months of the fiscal year (Jul-May). And after the May deficit it’s left with Rs 1.4 trillion to collect in June to meet the annual target of Rs 7.6 trillion; which was first raised from Rs 7 trillion to Rs 7.4 trillion and then to Rs 7.6 trillion.

This was clearly an unrealistic target to begin with, given FBR’s past performance, and was set just to meet the conditions of the IMF.

Now, to make up for this gap and going into the next fiscal, tax authorities will no doubt try to squeeze more out of existing taxpayers instead of broadening the net, which requires substantial FBR reforms and will take more time than the Fund is willing to give. And so we go round in circles.

It’s also pretty clear that this tax collection dilemma, which is by no means new, is not prompting the right kind of soul searching in the government. For one thing, it needs to be more transparent with the public whose tax money it needs so desperately to keep the IMF satisfied. And for another, it needs to do a better job of explaining to the donor that setting unrealistic targets does nobody any good because they encounter the same old problem at the end of the day. Crucial targets remain unmet and the programme is thrown into uncertainty all over again.

It seems the government is still missing the point that it will have to get the ball rolling on tax reforms even without the compulsions and complications of bailout programmes. This is not something that can be pushed down the priority list any longer. And this is one area where all political parties have failed equally spectacularly when in office.

Now that the monthly and annual shortfall is ringing alarm bells once again, hopefully reforms will begin even as negotiations with the IMF continue. And, most importantly, the people will be kept aware of the developments.

They have suffered the most, after all, because of unsuccessful negotiations with the IMF even after meeting all sorts of “upfront conditions”.

They should, therefore, know what lies ahead; especially when it is not going to be good news.

Copyright Business Recorder, 2023

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KU Jun 03, 2023 10:36am
Bad habits die hard, and unethical intentions become a part of their profession. This shortfall in tax collection means that they are going to zero in again on existing taxpayers. That's the power of a public sector institution in our country, do whatever you believe in and no one can question your professional skill or outcome, and they retire with unaccounted-for benefits.
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Ash Chak Jun 04, 2023 11:19pm
Most of the revenues were coming from taxes and tariffs on imports. Now that the imports have been choke off, there is a shortfall in revenues. IK understood this and used it to his advantage.
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