IMF scales down tax target to Rs 3.908 trillion

The International Monetary Fund (IMF) has revised projection of Federal Board of Revenue (FBR) tax collection of Rs 4.8 trillion pre-Covid-19 to Rs 3.908 trillion post Covid-19 for the current fiscal year, reflecting a decrease of Rs 0.892 trillion.

This was revealed in the staff report prepared by a staff team of the IMF under the Rapid Financing Instrument (RFI). As percentage of GDP, the FBR's tax collection is projected to decline from 10.9 percent to 9.3 percent during 2019-20 with: (I) Direct tax collection projection revised downward from Rs 1.9 trillion to Rs 1.6 trillion for 2019-20; (ii) Sales tax from Rs 1.852 trillion to Rs 1.427 trillion for 2019-20; (iii) Customs duty from Rs 697 billion to Rs 546 billion; (iv) Federal Excise Duty from Rs 329 billion to Rs 312 billion.

The IMF has also projected Rs 5.101 trillion tax collection target of the FBR for 2020-21 against pre-Covid19 projection of Rs 6.138 trillion for next fiscal year.

The staff report of the IMF revealed that the announced fiscal stimulus package, worth 1.2 percent of GDP, includes (i) relief to vulnerable families through an expansion of existing programs and higher disbursements; (ii) support for daily wage earners by establishing a PRs 200 billion fund for the most affected workers; (iii) strengthening the utility stores corporation network and funding to increase food security; (iv) temporary reduction in food prices to ensure essential items remain affordable; (v) provision of affordable healthcare through the elimination of taxes on essential health machinery and equipment; (vi) support for the export sector by eliminating the backlog on GST tax refunds, which will provide immediate cash flow relief; (vii) reduction in oil prices; (viii) relief on electricity and gas bills by providing options for installment payments; (ix) increase funding for the National Disaster Management Authority of Pakistan, the central focal agency to combat Covid-19, for the purchase of additional equipment and operations; and (x) building a contingency fund. In addition, the authorities have launched a program for the construction sector to address the acute employment needs generated by the lockdown, which include a special tax regime and no wealth declaration for projects launched during a short window until the end of 2020.