ISLAMABAD: The ministry of finance has advised Federal Board of Revenue (FBR) to enhance monitoring and enforcement in order to achieve annual targets.
In a report, the Ministry said that the FBR revenue target for FY 2019-2020 is very challenging, unprecedented and all time high, keeping in view previous year’s allocations and actual collections.
The performance of FBR in the first half of the FY 2019-20 is very encouraging, it said.
However in order to achieve the annual revenue target, a lot of efforts have to be taken by the tax functionaries.
Though, number of tax filers has reached to around 2.7 million, an increase of almost 40 percent in the first half has been witnessed, which is record high in the history of FBR.
“This has enhanced the chances of higher revenue generation, albeit increased enforcement and monitoring measures are required to achieve the annual targets.”
Any shortfall in achievement of these targets in tax revenue collection will have adverse consequences for the projected fiscal position of the government, the ministry said.
One of the consequences of falling short on revenue targets would be curtailment in development expenditure.
The ministry of finance said that the fiscal consolidation measures have brought financial discipline and increased revenue growth by bringing about stability in the economy and it is expected that a path of sustainable economic growth can be achieved.
The positive trend in ease of doing business, stable exchange rate, improved current account and better fiscal and monetary management, denote that the economic outlook seems promising.
However, there are certain risks in achieving this fiscal sustainability which can compromise the desired results.
The major fiscal risks are as under:
Shortfall in Tax Revenue, unexpected volatility in exchange rate, losses and circular debt in energy sector, increase in pension expenditure & liabilities, public debt and financing fiscal deficit, state owned entities (SOEs) losses.
On expenditure side, the ministry said that tight fiscal discipline has resulted in keeping a check over the current expenditure side of the government.
The historical trend has been that the demand for non-development expenditure increases many folds in the second half of the financial year, especially in the fourth quarter.
As there had been rationalized cuts in the budgets of various Divisions, nevertheless there is likelihood that the demand for supplementary grants will occur.
The govt will have to be cognizant of this. On the development expenditure side, the unprecedented budget release strategy adopted by the Finance Division this year has provided a lot of fiscal space for utilization of the PSDP funds.
Accordingly, it is expected that development expenditure will be high resulting in timely completion of approved schemes and projects.
This should aid to foster growth and create employment.