ISLAMABAD: The Federal Board of Revenue (FBR) fell short of its revenue collection target by nearly Rs85 billion in January, mainly due to lower-than-expected inflation.
The FBR collected Rs872 billion in January, against a target of Rs957 billion, marking a 26% increase compared to Rs677 billion collected in the same month last year, based on provisional data released on Friday.
From July to January of the current fiscal year, the total shortfall in revenue collection amounted to Rs468 billion, presenting a significant challenge for the FBR to bridge the gap in the remaining months.
The FBR’s collection during the first seven months of FY25 stood at Rs6.497 trillion, falling short of the target of Rs6.965 trillion. However, this represents a 26% increase compared to the Rs5.143 trillion collected during the same period last year.
The shortfall is primarily attributed to lower tax collection from imports, sluggish manufacturing growth, and unexpectedly low inflation, which has recently dropped to single-digit levels.
The government’s ambitious revenue target of Rs12.913 trillion for FY25, a 40% increase from FY24, now seems challenging to meet. The lack of cuts in expenditures and the unforeseen rise in the revenue target are contributing to the difficulty in achieving this goal.
The FBR disbursed Rs307 billion in refunds during the first seven months of FY25, an increase of 12.45% from Rs273 billion in the same period last year. However, refunds in January saw a nearly 13% decline to Rs34 billion year-on-year.
The government expects an additional Rs3.659 trillion in revenue for FY25, primarily driven by 3% GDP growth, 3.5% expansion in large-scale manufacturing, inflation at 12.9%, and a 16.9% increase in imports, which are projected to generate an additional Rs1.863 trillion in revenue.
Independent economists estimate the real revenue collection for FY25 will be around Rs12 trillion.
An IMF team is set to visit Islamabad in late February or early March to conduct the first economic review under the 37-month $7 billion Extended Fund Facility. It is anticipated that the revenue shortfall will be managed through adjustments in autonomous growth and expenditure cuts, rather than new taxes.
During July-January, income tax collections totaled Rs3.160 trillion, exceeding the target of Rs2.877 trillion by Rs283 billion, with a 29% growth compared to last year’s Rs2.445 trillion.
Sales tax collections fell short of the target by Rs467 billion, totaling Rs2.218 trillion, reflecting a 26% growth from last year’s Rs1.763 trillion.
Customs collections also missed the target by Rs166 billion, reaching Rs713 billion, which was a 14% increase compared to Rs628 billion last year.
Federal Excise Duty collections fell short by Rs120 billion, totaling Rs404 billion, a 31% increase compared to Rs307 billion in the previous year.
