Petroleum products: Revenue intake rises despite plunge in crude oil prices

Government collects 6.6% or Rs34.5b more in taxes and duties in 2014-15, according to fiscal policy statement


Shahbaz Rana February 03, 2016
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ISLAMABAD:


The federal government collected Rs555 billion or roughly one-fifth of the total tax revenues from petroleum products in the last fiscal year despite a steep decline in crude oil prices and its imports, reveals a fiscal policy statement submitted to the National Assembly.


The government largely withheld benefits of the reduction in world crude oil prices by revising upward the general sales tax and levying duties. The Rs555-billion collection on account of general sales tax, customs duties and petroleum levy during 2014-15 was 6.6% higher than the previous fiscal year, according to the Fiscal Policy Statement 2015-16.

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This belies the government’s claim that the plunge in global oil prices has adversely affected its revenue collection.

By the end of 2014-15, crude oil prices had dropped over 50% compared with the previous year, which led to over 21% reduction in the oil import bill in dollar terms. Still revenues from petroleum products went up 6.6% or Rs34.5 billion over the previous year.

The Ministry of Finance submitted the fiscal policy statement to the lower house of parliament to meet the requirement of the Fiscal Responsibility and Debt Limitation Act 2005.

The government got Rs399.2 billion on account of sales tax at import and domestic stages, which was almost in line with previous year’s collection of Rs400 billion. Sales tax on petroleum products constituted 35.2% of the total sales tax collection in 2014-15.

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Sales tax on petroleum products remained the top revenue contributor both at the domestic and import stages. these were the second highest revenue generation tool on account of customs duties at the import stage. Similarly, they were the top revenue spinner under the head of other taxes that include petroleum levy.

The standard sales tax is 17% but the government is charging higher rates on sale of petroleum products. On high-speed diesel, used in agriculture and public transport, sales tax has been increased to Rs29.58 per litre, which is 64% of the current price of the product.

In the domestic market, sales tax collection has been largely concentrated in few commodities.

The decline in international oil prices and import of petroleum products has reduced their contribution to around 44% in sales tax from the domestic market compared to last year’s 46%, noted the Debt Policy Coordination Office of the Ministry of Finance.

Despite that, petroleum products remained the top revenue generator in domestic sales tax collection, which stood at Rs233.2 billion in 2014-15, slightly higher than the previous year.

Similarly, the government collected Rs166 billion in sales tax on petroleum products at the import stage, down 2.1% compared to the previous year. This collection constituted 30% of the total sales tax received at the import stage.

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The government also received Rs24.4 billion in customs duties on petroleum products, which was 45.2% higher than the previous year. In the category of other taxes, Rs131.4 billion was collected on account of petroleum levy, roughly 27% higher than the previous year.

At the prevailing global crude prices and standard 17% sales tax, the price of high-speed diesel and petrol should be below Rs50 per litre, said Shahid Sattar, former member energy of the Planning Commission.

He, however, said the government had a reason for refusing to pass on the full impact of the reduction in oil prices. “The real question is whether the money generated by charging a higher tax is used for building mega dams or financing the budget deficit,” said Sattar.

In 2014-15, the Federal Board of Revenue had collected a total of Rs2.588 trillion against the original target of Rs2.810 trillion. Tax collection rose 14% compared to a growth of 16% in the previous year.

Published in The Express Tribune, February 3rd, 2016.

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COMMENTS (3)

Parvez | 8 years ago | Reply Today the price of petrol in Pakistan is comparable with many countries....what is unbalanced is the revenue generated through tax in other countries is used for their financial stability but in Pakistan it is regarded as a ' windfall ' that mainly goes into the pockets of corrupt leaders, while the nation relies on borrowing to bridge the gap between revenue and expenditure.
saad | 8 years ago | Reply Where were the critics when petrol was heavily subsidised by the gov.ohhh i forgot we are a nation of losers and selfish people who can only think for our selves.
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