Mini-Budget on horizon as FBR misses back-to-back revenue targets

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Mini-Budget on horizon as FBR misses back-to-back revenue targets

ISLAMABAD, MAR 3 /DNA/ – In a concerning trend, the Federal Board of Revenue (FBR) has not met its revenue collection goals for the second consecutive month, leading to speculation about the government’s potential recourse to emergency fiscal strategies. This persistent underperformance necessitates the generation of an additional Rs 18 billion monthly throughout the fiscal year 2023-24 to mitigate the shortfall.

The situation is dire enough that a deviation exceeding 1% from the target could trigger the activation of a supplementary budget, as stipulated by an agreement with the International Monetary Fund (IMF). Official reports reveal that the FBR’s revenue collection fell short by 1.3% and 4.6% in January and February 2024, respectively.

Insider sources have disclosed that February’s collections amounted to Rs 681 billion, significantly below the targeted Rs 714 billion, resulting in a Rs 33 billion deficit. January witnessed a shortfall of Rs 9 billion, cumulatively amounting to a Rs 42 billion loss over two months. This financial discrepancy has been attributed to FBR’s resistance against the Finance Minister’s proposed reforms aimed at enhancing the efficiency of the tax apparatus.

Allegedly, this resistance has escalated to the point of calls for a strike by senior management of the FBR, undermining the institution’s operational integrity. There is speculation within the FBR that revenue metrics will improve with the appointment of a new Finance Minister, suggesting that the current downturn is a strategic maneuver to assert dominance and negotiate favorable conditions with the upcoming fiscal leadership to avoid reforms at FBR.

This internal strife hints at a deeper malaise, with the potential introduction of a mini-budget as a corrective measure, in line with IMF agreements. Such a move, however, would likely place additional financial burdens on the public.

To counteract the revenue shortfall, the government has outlined eight provisional measures projected to bolster monthly revenue by Rs 18 billion during the 2023-24 fiscal year. These include adjustments to sales tax rates on textiles and leathers, the introduction of a Federal Excise Duty (FED) on sugar, and incremental increases in advance income and withholding taxes on various sectors.

Each measure is carefully calibrated to address the revenue gap without imposing undue strain on the economy. However, the efficacy of these strategies and their impact on the broader economic landscape remains to be seen, as stakeholders closely monitor the FBR’s next moves in this financial chess game.