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Coronavirus
VERY HIGH Source: covid.gov.pk
Pakistan Deaths
27,206
7124hr
Pakistan Cases
1,223,841
2,58024hr
4.69% positivity
Sindh
450,126
Punjab
421,800
Balochistan
32,757
Islamabad
104,114
KPK
171,072

What should have been announced through a formal detailed data release by the Federal Board of Revenue (FBR) came in fact to be known through Shabbar Zaidi’s tweets. The tax boss tweeted late last week that his tax collection in November 2019 stood at Rs334 billion, taking the five-month growth number to 17 percent as against the year-on-year growth of 16 percent by the end of October 2019.

There is no doubt that cumulative year-on-year growth in FBR’s total tax revenues has been growing each passing month. It began with 12.6 percent growth in July 2019 and stood at 17 percent at 5MFY20. But that should not be a reason to rejoice, there is miles to go before Shabbar can even think about sleeping.

The total 5MFY20 collection stands at about 29 percent of the budgeted amount, which is lower than the average of 32 percent in the last ten years. These are serious gaps in annualized terms. Granted that sales tax and direct tax collection galloped by 35 and percent 20 percent respectively in 5MFY20, and it may be great achievement in an economy that’s otherwise slowing.

Collections under the customs head, however, fell, courtesy slowdown in imports; its share was about a fifth in total revenues last year, and now stands at 16 percent. The tax body doesn’t report the breakup of sales (under domestic and import heads) on monthly basis. But don’t be surprised if the growth in sales tax collection is actually rooted in collections from domestic commerce rather than from the import stage.

Critical to this analysis is the number of new tax filers who have filed sizeable returns (as against the usual increase of zero return filers). If the number of sizeable-return new filers has substantially increased, then perhaps there is still some hope for the years hence. But such datasets are not reported. Isn’t the number of filers a key performance indicator that the public ought to know? (See also How not to write FBR’s revenue yearbook? Dec 2, 2019)

FBR’s daunting challenge began with the huge FY20 budgeted target of Rs5.5 trillion. Even if one applies a standard 10 percent haircut to this number, the revised full year target comes down to Rs4.9 trillion, implying that full year growth would have to be 31 percent over last year’s collection. That’s a never-before growth in recent history – the highest we have seen is 21 percent in the last ten years whereas average growth in the last ten years has been 13 percent.

So while the pace of growth may be growing with each passing month, it is not enough. The 17 percent growth that we have seen so far is after all the data analytics, notices sent to non-filers, removal of zero-rating, raids, user-friendly return filing portal and what not, which by the way aren’t a substitute for a good administrative staff and system, reforming which isn’t a one-year job. Mind you, five months are already behind us. The clock is ticking! (For more on FBR’s budgeted target read BR Research’s Does Shabbar has a magic spell? June 12, 2019).

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