FBR Shortfalls Rs374 Billion, Banks Stay Open to Close Tax Gap

As the tax shortfall against the revised target widened to Rs374 billion, the central bank ordered commercial banks to remain open on a holiday in an attempt to collect more revenue and minimize the yawning gap. The Federal Board of Revenue (FBR) collected Rs7.15 trillion till the last working day of July-January, underperforming its July-January target by Rs374 billion, according to provisional results as of Friday evening. This was 12% higher than the same period last year.

The FBR expects collection to improve by Rs50 billion on Saturday after more companies deposit money on account of super tax arrears. Despite recovering some arrears due to a Federal Constitutional Court judgment in favor of the FBR, State Bank of Pakistan (SBP) instructed banks to remain open for extended working hours on Saturday to facilitate taxpayers in making over-the-counter payments.

“To facilitate taxpayers in making over-the-counter payments of government duties and taxes,” according to a statement from SBP, “it has been decided that Saturday opening branches of all commercial banks shall observe extended working hours from 9am to 5pm.” The central bank also advised banks to keep their concerned branches open on January 31 for as long as required to facilitate the Special Clearing for Government transactions conducted by NIFT. Banks are expected to ensure uninterrupted availability of online payment channels, including internet banking, mobile applications, ATMs, and other digital platforms.

Despite Prime Minister Shehbaz Sharif’s investment in improving FBR performance, no significant results have been achieved so far. The Constitutional Court ruled in favor of the government in the super tax case, allowing FBR to recover Rs190 billion from taxpayers. While officials say at least Rs50 billion has already been recovered, further recoveries are expected next month.

However, Dr Ikramul Haq, a renowned tax and legal expert, criticized the short order by Federal Constitutional Court validating super tax under sections 4B and 4C of the Income Tax Ordinance. He argued that this judgment contradicted established constitutional jurisprudence governing the limits of parliamentary power to impose taxes on income.

The FBR’s performance has deteriorated despite distributing 1,000 cars and increasing salaries by up to 400% to incentivize officers. Against a revised target of Rs3.64 trillion, the FBR collected only Rs3.5 trillion in income tax, short of its goal by Rs162 billion but was 12.5% higher than last year. Sales tax collection stood at Rs2.44 trillion, falling short of the target by Rs207 billion but still 11% higher than previous years.

Federal excise duty collection reached Rs462 billion, slightly above the revised target, and was also up 18% compared to the previous fiscal year’s figures. Customs duty collected Rs750 billion, just below its target by Rs30 billion. The FBR disbursed Rs339 billion in refunds this month, which were Rs25 billion higher than last year.

With collection expected to exceed Rs1 trillion by Saturday evening, the FBR continues to urge companies to pay super tax arrears.