Islamabad, 12 June 2024, (GNP):The government’s plan to unveil the upcoming budget for 2024-25 includes setting an ambitious tax collection target for the Federal Board of Revenue (FBR) at Rs12.97 trillion.
This represents a significant increase compared to the revised estimate of Rs9.252 trillion for the outgoing financial year.
This step is likely aimed at securing a fresh deal with the International Monetary Fund (IMF), demonstrating a commitment to fiscal discipline and enhanced revenue generation.
To secure the IMF deal and achieve fiscal consolidation, the government has revised its tax collection strategies and targets for the 2024-25 budget. The Federal Board of Revenue (FBR) has set an ambitious tax collection target of Rs12.97 trillion, significantly higher than the revised target of Rs9.2 trillion for 2023-24, which itself was lowered from the initial Rs9.415 trillion.
Key points of the tax strategy include:
1: Revenue Generation Efforts: The government aims to reduce the fiscal deficit from over 7.6% to 6.5% of GDP by focusing on revenue enhancement and expenditure control.
2: Inland Revenue Focus: The FBR plans to boost revenues by Rs1.7 trillion through Income Tax and Rs1.3 trillion through GST, relying on nominal growth, stringent enforcement, and extensive taxation measures.
3: Direct and Indirect Taxes:
Direct Taxes: Targeting Rs5.512 trillion, including Rs5.45 trillion from Income Tax.
Indirect Taxes: Projecting Rs4.919 trillion from Sales Tax, Rs0.948 trillion from Federal Excise Duty, and Rs1.591 trillion from Customs Duty
4: Tax Base Expansion: The IMF recommends leveraging detailed data on taxpayers, encompassing their socio-economic characteristics and their tax obligations and payments, to broaden the tax base effectively.
These measures aim to demonstrate the government’s commitment to fiscal responsibility and enhanced revenue collection to secure the much-needed IMF support.
Also Read: US concludes landmark summit on the future of higher education in Pakistan
To meet the ambitious tax collection target and fiscal consolidation goals for the 2024-25 budget, the Federal Board of Revenue (FBR) will need to take several critical steps:
1: Access to Data:
Taxpayer Data: Crucial for achieving the tax collection target, requiring comprehensive access to revenue administration data.
Additional Data: Tax Policy Units (TPUs) will need household budget surveys, business surveys, social security data, and property information from various national agencies and central banks.
Privacy Concerns: Establishing data-sharing agreements must address privacy and confidentiality issues.
2: Utilizing Technology: The FBR will need advanced technological solutions to handle large datasets for effective exchange, storage, management, and analysis.
3: Expenditure Cuts:
Pension Reforms: Implementing reforms to reduce pension-related expenditures.
Subsidies: Cutting back on subsidies.
State-Owned Enterprises: Reducing costs associated with state-owned enterprises.
4:Budget Overview:
Total Outlay: The upcoming budget will have a total outlay of over Rs18.5 trillion.
Revenue Mobilization: The government will need to generate revenue through both tax and non-tax sources, alongside managing expenditures efficiently.
By leveraging data-driven insights and cutting unnecessary expenditures, the FBR aims to meet its tax collection targets and support the government’s broader fiscal objectives, aligning with IMF recommendations for economic stability.
