ISLAMABAD: The federal government is bracing for a tax revenue shortfall of Rs80-90 billion in December 2024, despite recent measures to enhance revenue.
A presidential ordinance has imposed a 44% tax on banking sector profits. The Federal Board of Revenue (FBR) expects to collect Rs70 billion from the banking sector by December 31, 2024. This measure aims to mitigate the shortfall in tax revenue.
Revised Tax Rates on Banking Sector
Previously, banks faced a maximum tax rate of 55%. Following an agreement, this rate was revised to an average of 44% for the tax year 2025. Over subsequent years, the tax rate will decrease to 43% in 2026 and 42% in 2027.
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Tax Collection Targets Fall Short
In the first five months of the fiscal year (July-November), the FBR reported a shortfall of Rs340 billion. Tax collections during this period totaled Rs4,295 billion, falling short of the target of Rs4,635 billion. With the projected December shortfall, the FBR’s cumulative shortfall for the first half of the fiscal year could rise to Rs420-430 billion.
IMF-Linked Revenue Targets
The FBR must collect Rs6,009 billion by the end of December under an agreement with the International Monetary Fund (IMF). This requires Rs1,714 billion in tax revenue to be generated in December alone.
Corporate Tax Rates Remain Steady
Small companies will be subject to a reduced 20% tax rate by the tax year 2026. For all other companies, the standard tax rate of 29% will continue to apply.
Legal Adjustments Made
The ordinance issued on December 29 clarified that past transactions remain unaffected. Amendments to the Seventh Schedule of Ordinance XLIX of 2001 include revisions to tax rules and explanations, ensuring updated compliance for taxpayers.
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