The Federal Board of Revenue (FBR) and the International Monetary Fund (IMF) recently held talks to discuss the potential increase in the FBR’s revenue collection target for the 2022-23 fiscal year (FY23). The first round of technical-level talks between the two organizations concluded on Friday.
According to sources, the FBR’s tax collection target has not yet been changed, but it may be revised depending on the amount of additional taxation measures that will be taken through the promulgation of an Ordinance. The FBR has proposed measures worth over Rs. 200 billion to raise the tax-to-GDP ratio, which was also discussed in detail with the IMF.
One of the major revenue generation measures proposed by the FBR was a 17 percent sales tax on petroleum products or an increase in the standard rate of sales tax from 17 to 18 percent. The FBR could easily impose this tax through a notification, but revising the sales tax rate would only be possible through an Ordinance, according to sources.
In addition to the sales tax on petroleum products, the FBR also proposed increasing the rates of withholding taxes, tax on banks’ foreign exchange income, capital value tax on vehicles, and Federal Excise Duty on cars, beverages, and cigarettes. Other proposals included additional regulatory duties or a 3 percent flood levy on imports.
When contacted, FBR officials stated that the FBR is confident it will achieve its assigned tax collection target of Rs. 7,470 billion by the end of the current fiscal year.
The talks between the FBR and the IMF focused on finding ways to increase the country’s tax revenue, with a particular emphasis on measures that could have a significant impact. Whether the FBR will revise its target remains to be seen, but it is clear that both organizations are committed to improving the country’s financial stability.
