ISLAMABAD: The federal government is set to unveil the much-anticipated Rs18.5 trillion budget for the fiscal year 2024-25 today (Wednesday), aiming to secure a new International Monetary Fund (IMF) bailout.
Finance Minister Muhammad Aurangzeb will present the budget in the National Assembly after its approval from the federal cabinet.
This budget announcement follows the government’s revelation that economic growth for the current year is expected to be 2.4%, missing the 3.5% target. However, revenues have increased by 30% compared to last year, and both the fiscal and current account deficits are under control.
The government is expected to set the Federal Board of Revenue’s (FBR) tax collection target at Rs12.97 trillion for the next fiscal year, up from the revised estimates of Rs9.252 trillion for the outgoing financial year. The FBR had previously lowered the tax collection target from Rs9.415 trillion to Rs9.2 trillion for 2023-24.
The FBR aims to pursue fiscal consolidation by reducing the overall fiscal deficit from over 7.6% in the outgoing fiscal year to 6.5% of GDP in the next budget. This will be achieved through increased revenue efforts and curtailing excessive expenditures.
Significant tax revenue mobilization efforts will focus on Inland Revenue (IR), including income tax and GST, with anticipated revenue increases of Rs1.7 trillion and Rs1.3 trillion, respectively. These increases will be driven by nominal growth, effective enforcement, and substantial taxation measures.
Of the Rs12.97 trillion annual tax collection target for the next budget, the FBR plans to collect Rs5.512 trillion through direct taxes, including Rs5.45 trillion from income tax, Rs4.919 trillion from sales tax, Rs0.948 trillion from federal excise duty, and Rs1.591 trillion from customs duty.
To expand the tax base, the IMF recommends access to detailed taxpayer data, including socio-economic characteristics and tax liabilities. Access to taxpayer-level data from the revenue administration is crucial for this goal.
Additional required data might include household budget surveys, business surveys, social security data, property information, and other relevant data depending on the analysis type.
Privacy and confidentiality must be considered when establishing data-sharing arrangements between tax policy units (TPUs) and government bodies that hold the data. The FBR will need to leverage technology to manage and analyze large data sets.
The government also plans to reduce expenditures through pension reforms, cuts in subsidies, and managing the costs of State-Owned Enterprises (SOEs).
With a total outlay of over Rs18.5 trillion for the upcoming budget, the government will need to mobilize both tax and non-tax revenues while managing expenditures.
