2015-16 fiscal review: FBR nails down Rs3.1tr tax target

Foreign currency reserves soar to highest-ever level of $23 billion


Shahbaz Rana July 02, 2016
Federal Board of Revenue. PHOTO: AFP

ISLAMABAD: The federal finance minister announced a victory on the fronts of achieving the highest-ever tax collection target and increasing the foreign currency reserves to historic $23 billion but refrained from disclosing the measures he applied to achieve these targets.

“The Federal Board of Revenue (FBR) has achieved its Rs3.104 trillion tax collection target and foreign currency reserves also crossed the $23 billion threshold as of June 30,” announced Ishaq Dar in a brief speech aired by the state-run Pakistan Television (PTV).

In June 2013, Pakistan’s total reserves stood at $6.8 billion while $23 billion is the highest-ever in the country’s history. The tax collection of Rs3.1 trillion rupees represents 60% increase in the past three years, representing an average increase of 20% per annum. In comparison, the average increase between 2008 and 2013 was 3%.

However, the government missed the income tax collection target by a wide margin and the annual target of Rs3.1 trillion was achieved on the back of massive increase in indirect tax collection that even surpassed the targets.

As much as 61% of the total collection came from indirect taxes, excluding revenues generated by collecting withholding taxes. After including withholding taxes, the indirect taxation comes to about 85% of the total collection.



Usually the withholding taxes are treated as income tax but due to unpaid refunds and people’s decision to stay away from the tax net these withholding taxes turned out to be indirect taxes.

This is the first time the FBR has achieved its revenue collection target without downward revision, claimed Dar. He took credit for increasing tax collection from Rs1.95 trillion in 2013 to Rs3.1 trillion by 2016.

He said the increase in collection would also result in transfer of Rs1.9 trillion to the provinces as their shares in the federal divisible pool under the 7th National Finance Commission Award.

How did it happen?

Despite achieving the overall target, the FBR missed its income tax collection target by more than Rs140 billion.

Against the target of Rs1.347 trillion, the FBR’s gross income tax collection stood at Rs1.212 trillion, including the refunds. After excluding the refund payments, the gap between target and collection would widen further.

Unlike the income tax, the FBR surpassed its Rs1.250 trillion sales tax collection target. The gross sales tax collection stood at Rs1.356 trillion – higher by Rs106 billion as a result of massive increase in sales tax rates on petroleum products and introduction of a mini-budget in December last year.

Similarly, the gross collection under the head of Customs duties stood at Rs401 billion – Rs102 billion more than the target. In December, the government introduced a special 1% Customs duty on thousands of imported items besides imposing regulatory duties on about 387 additional items.

Insiders, however, told The Express Tribune that the overall collection of Rs3.1 trillion was a result of one of the largest clandestine operations, as the FBR took over Rs150 billion in advance taxes from oil and gas, telecommunications and banking companies.

The government also blocked payment of over Rs250 billion genuine refunds of the taxpayers.

A recent report of the Federal Tax Ombudsman office also accused the finance minister of blocking the taxpayers’ refunds. However, the FBR denies the finance minister has any role in it.

Currency reserves

Of the foreign currency reserves of $23 billion, the reserves held by the State Bank of Pakistan amount to $18 billion. This week alone, Pakistan received $1.3 billion in loans from the International Monetary Fund, World Bank and the Asian Development Bank.

The central bank’s gross official reserves of $18 billion include about $11 billion in borrowings from various sources. To boot, Saudi Arabia gave a gift of $1.5 billion while China deposited $1 billion with the State Bank to help Pakistan bolster its reserves.

Published in The Express Tribune, July 2nd, 2016.

COMMENTS (2)

Abdul Qadir | 7 years ago | Reply May be for a layman, meeting fiscal targets was laudable. To me, 85% collection from indirect sources is a failure as it hits rich and poor alike. Tax collection should be from where it is due not from wherever I can forcefully and easily collect it! We need structural changes in our revenue collection mechanism. When was the last time we had a budget surplus? or a breakeven budget?
Abdul Rehman | 7 years ago | Reply We should appreciate where it's due. Mr Rana is always very very very critical of PML(N) in all his articles for some unknown reasons.
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