The International Monetary Fund (IMF) has revised the projection of the Federal Board of Revenue’s (FBR) tax collection of Rs 4.8 trillion pre-COVID-19 to Rs. 3.908 trillion post-COVID-19 for the current fiscal year, reflecting a decrease of Rs. 0.892 trillion.
This was revealed in a staff report prepared by the IMF under the Rapid Financing Instrument (RFI). As a percentage of GDP, the FBR’s tax collection is projected to decline from 10.9 percent to 9.3 percent during 2019-20 with:
- Direct tax collection projection revised downward from Rs. 1.9 trillion to Rs. 1.6 trillion for 2019-20,
- Sales tax from Rs. 1.852 trillion to Rs. 1.427 trillion for 2019-20,
- Customs duty from Rs. 697 billion to Rs. 546 billion,
- Federal Excise Duty from Rs. 329 billion to Rs. 312 billion,
The IMF has also projected a Rs. 5.101 trillion tax collection target of the FBR for 2020-21 versus a pre-COVID-19 projection of Rs. 6.138 trillion for the next fiscal year.
The staff report of the IMF reveals that the announced fiscal stimulus package, worth 1.2 percent of GDP, includes:
- Relief for vulnerable families through an expansion of existing programs and higher disbursements.
- Support for daily wage earners by establishing a Rs. 200 billion fund for the most affected workers.
- Strengthening the utility stores corporation network and funding to increase food security.
- Temporary reduction in food prices to ensure essential items remain affordable.
- Provision of affordable healthcare through the elimination of taxes on essential health machinery and equipment.
- Support for the export sector by eliminating the backlog on GST tax refunds, which will provide immediate cash flow relief.
- Reduction in oil prices.
- Relief on electricity and gas bills by providing options for installment payments.
- Increase funding for the National Disaster Management Authority of Pakistan, the central focal agency to combat COVID-19, for the purchase of additional equipment and operations.
- Building a contingency fund. In addition, the authorities have launched a program for the construction sector to address the acute employment needs generated by the lockdown, which include a special tax regime and no wealth declaration for projects launched during a short window until the end of 2020.