During the first half of the fiscal year 2022, the Federal Board of Revenue (FBR) recorded a significant decline in tax recovery numbers. The FBR collected Rs. 20 billion in income tax arrears and tax demands, compared to Rs. 38 billion in the same period of the previous fiscal year, representing a sharp decline of 47.3 percent.
An FBR report highlighted the poor performance of the tax machinery in terms of creating tax demands and recovering income tax arrears during the first half of the fiscal year 2022. The collection through income tax demands witnessed a substantial decrease of 47.3 percent.
The FBR conducted an analysis of the Components of Income Tax Collection on Demand (CoD) and Advance Tax/Payments with Returns. Both components of tax collection on demand experienced a decline during the first half of the fiscal year 2021-22. This decline can be attributed to the FBR’s focus on providing maximum facilitation to the business community and creating a conducive business environment for economic growth. The collection from current demand decreased by 62.5 percent, while arrear demand declined by 31.9 percent.
A significant portion of income tax comes from withholding taxes, while CoD contributes around two percent. The voluntary payments component has shown positive progress with a growth of 18.1 percent during July-December 2021-22. Payments with returns recorded strong growth of approximately 48 percent, and advance tax payments increased by 11.7 percent. These figures reflect the increased confidence of the business community in the FBR’s service initiatives.
In the previous fiscal year 2020-21, the overall collection from CoD amounted to Rs. 80.1 billion, showing a growth of 31.8 percent compared to the previous year’s collection of Rs. 60.8 billion. The recovery from arrear demand exhibited significant growth of around 75 percent, while current demand increased by 19.9 percent. To further enhance this trend, a comprehensive desk audit by field formations can prove beneficial in increasing the share of CoD in overall income tax collection.
