IMF warns of ‘contingency plan’ if quarter tax target missed by Rs60bn

ISLAMABAD: The IMF has cautioned that if the FBR misses its tax collection target for the first quarter (July-September) by Rs60 billion, the tax authority must implement a contingency plan during the current financial year.

With the appointment of new FBR chairman, his primary challenge is to achieve the tax collection target for the first three months of the fiscal year. Failure to do so could result in the introduction of a mini budget.

The newly-appointed chairman has begun assembling his team, appointing Dr. Hamid Ateeq Sarwar, a BS-21 Inland Revenue Service (IRS) officer, as a member of IR Policy. Dr. Sarwar, who was awarded the Sitara-i-Imtiaz, has returned from deputation to assume his new role. As a member of IR Policy, he will be the primary point of contact for the FBR in negotiations with the IMF on crucial taxation issues. Additional changes within the FBR are expected in the coming days.

Amna Faiz Bhatty (Inland Revenue Service/BS-20) has been replaced as a member of the IR Policy and reassigned as Commissioner-IR (Appeals-I), Lahore. Senior officials had previously informed her that she would be transferred from her role in the IR Policy.

Senior officials confirmed to The News on Thursday that the implementation of IMF’s contingency plan with the Pakistani authorities suggests the government may need to introduce a mini budget during the current fiscal year.

According to the agreed-upon tax collection target with the IMF, the FBR must collect Rs2,652 billion in the first quarter of the fiscal year. In July 2024, the FBR had exceeded its tax collection target by Rs4 billion, collecting Rs660 billion against the assigned target of Rs656 billion.

However, the pressure remains on economic managers to achieve the remaining Rs2,592 billion target for the quarter to avoid triggering the IMF’s demand for a mini budget under the contingency plan. The IMF has emphasized the need to avoid revenue collection shortfalls in the first quarter.

The IMF had previously revised the overall tax collection target for the current fiscal year from Rs12,970 billion to Rs12,913 billion, although parliament had approved the higher figure of Rs12,970 billion. For the last fiscal year, which ended on June 30, 2024, the FBR’s tax collection stood at Rs9,311 billion, surpassing the revised target of Rs9,252 billion.

Following the approval of the 2024-25 budget, the FBR had introduced the Tajir Dost Special Procedure, 2024, imposing fixed tax rates ranging from Rs100 to Rs60,000 per month based on the valuation of shops in 42 cities across the country. While registration under the scheme has reached approximately 150,000, the actual tax collection remains minimal, amounting to only a few thousand rupees as of last week.

The FBR had informed the IMF that it expected to collect Rs50 billion from retailers this fiscal year, but this target appears increasingly difficult to achieve.