Tag: additional taxes

  • FBR faces Rs75 billion shortfall in annual tax collection target

    FBR faces Rs75 billion shortfall in annual tax collection target

    The Federal Board of Revenue (FBR) is currently confronted with a shortfall of Rs75 billion in attaining the revised annual tax collection target of Rs7,200 billion for the fiscal year.

    Despite collecting Rs7,125 billion, which falls short of the revised target, the FBR faces a net revenue shortfall of Rs75 billion for the fiscal year 2022-2023.

    Originally, the FBR’s annual tax collection target was established at Rs7,640 billion for the outgoing fiscal year, subsequent to the unveiling of the mini-budget in February 2023.

    To generate additional revenue, the government implemented various measures, including an increase in the Goods and Services Tax (GST) rate from 17 per cent to 18 per cent, the application of a higher GST rate of 25 per cent on luxury goods, and a 154 per cent rise in the Federal Excise Duty (FED) on cigarettes.

    However, over the past four months, the FBR failed to generate the anticipated additional revenue, leading to a downward revision of the revenue collection target from Rs7,640 billion to Rs7,200 billion by the end of June 2023.

    Notably, Minister for Finance and Revenues, Ishaq Dar, took to Twitter to highlight the achievement of the highest-ever tax collection for the outgoing fiscal year.

    He stated, FBR has collected Rs7,000 billion in taxes for the first time in the country’s history as of June 26, 2023, and expressed optimism that the revenue collection would further increase by June 30, 2023.

    It is expected that the FBR will issue a formal statement regarding the revenue collection in due course.

  • Another IMF condition met as Pakistan imposes 25% sales tax on luxury items

    On Tuesday, the federal cabinet led by Prime Minister Shehbaz Sharif approved the imposition of a 25 per cent sales tax on luxury items, fulfilling a condition set by the International Monetary Fund (IMF) for the revival of the $7 billion Extended Fund Facility (EFF) that had been stalled for months.

    The cabinet approved the 25 per cent general sales tax (GST) on luxury items through a circulation summary. The Federal Board of Revenue will issue a formal notification in the coming days, and the new rate will be applicable from March 1.

    The list of items subject to the 25 per cent GST includes aerated water and juices, imported cars, mobile phones, pet food, sanitary and bathroom wares, carpets (excluding Afghanistan), chandeliers and lighting devices or equipment, chocolates, cigarettes, confectionery items, corn flakes, cosmetics, shaving items, tissue papers, crockery, decorative devices, doors and window frames, fish, footwear, fruits and dry fruits, furniture, home appliances (CBU), luxury leather jackets and apparel, mattress and sleeping bags, frozen or processed meat, musical instruments, arms and ammunition, shampoos, sunglasses, tomato ketchup and sauces, and travel bags and suitcases.

    The federal government also imposed a 25 per cent GST rate on locally manufactured luxury vehicles of 1,400cc and above. The FBR has estimated that it will collect an additional Rs15 billion in taxes through the enhanced GST rate of 25 per cent in the four-month period.

    According to sources, Pakistan and IMF held virtual negotiations on Monday to revive the loan program that had been stalled for months. During the meeting, the lender expressed satisfaction with the country’s measures, while Pakistan insisted on early finalization of the staff-level agreement.

    The negotiations were moving positively as the Fund did not place any new demands during the virtual session. The State Bank of Pakistan (SBP) informed IMF representatives about the estimated collection of foreign exchange reserves of $10 billion until June, and sources claimed that Pakistan had achieved future targets before the staff-level agreement.

    It is worth mentioning that the government has expedited the implementation of IMF demands to unlock the loan tranche for the country’s economic recovery.