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Covid-19 wave likely to hit revenue collection in May, June

  • May 09, 2021

ISLAMABAD – The ongoing third Covid-19 wave is likely to hit the revenue collection in remaining two months (May and June) of the current fiscal year (2020-21).

The Federal Board of Revenue (FBR) might struggle to achieve the revised tax collection target as the third Covid-19 wave required business restrictions. An official of the FBR informed that third wave of Covid-19 had slowdown the economic activities in last few weeks and the ongoing Eid vacations are hitting the tax collection. The FBR will have to collect Rs910 billion in two months to achieve the revised tax collection target. “The FBR was on track to achieve the revised target,” he said and added that it might struggle now to reach nearer the target as business activities halted in the country for almost ten days.

The government in consultation with the International Monetary Fund (IMF) had downward revised the tax collection target to Rs4.69 trillion from Rs4.96 trillion. In last two months, the FBR had surpassed the monthly tax collection targets despite Covid-19 impact on all segments of economy. The FBR had collected net revenue of Rs3780 billion during first ten months (July-April) of the current fiscal year, which had exceeded the target of Rs3637 billion by more than Rs143 billion. This represents a growth of about 14% over the collection of Rs3320 billion during the same period last year.

Federal Minister for Finance and Revenue Shaukat Tarin in his maiden press conference in last week said that Covid-19 is affecting the tax collection. He said that revenues were increasing at 92 percent till April 20, compared to the same month last year, but dropped to 57 percent after 10 days, as the third Covid-19 wave required business restrictions. “The improved revenue performance is a reflection of growing economic activities in the country despite facing the challenge of third wave of COVID-19. However, in the closing days of the April, revenue collection slowed down considerably as measures to fight COVID were put in place. Collections in May and June would be affected in case fighting pandemic reduces the space for economic activities,” said the FBR. 

It is worth mentioning here that government had restricted the budget deficit in first nine months (July to March) of the year 2021-22 mainly due to improved tax collection. The country’s expenditures stood at Rs6.64 trillion as against the revenues of Rs4.99 trillion leaving budget deficit at Rs1.65 trillion or 3.6 percent of the GDP, according to the latest data of ministry of finance. Primary balance, which is the difference between government’s revenue and its non-interest expenditure, was recorded in surplus of Rs451.8 billion. The government has restricted the budget deficit at 3.6 percent of the GDP during July-March period of 2020-21 as against 3.8 percent of the GDP in corresponding period of the previous year.

However, budget deficit would surge if the government fails to achieve the revised tax collection target amid third wave of Covid-19 in the country.

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