Tax collection: FBR misses target for fourth successive month

This comes as govt back-pedals on key tax policy measures.

ISLAMABAD:

The federal government’s back-pedalling on critical tax policy measures has led to less than targeted collection for the fourth month in a row, as major policy and administrative measures, which were announced for improving revenues, remain unimplemented.

Against the monthly target of Rs164 billion, the Federal Board of Revenue (FBR) could collect Rs155 billion until the end of October, according to provisional figures. The FBR has already missed its first quarter target by Rs15 billion, taking the cumulative shortfall to Rs24 billion.

The shortfall in revenues will weaken the country’s case with the International Monetary Fund, which may allow the lender to put pressure on the government to levy more taxes. An IMF mission is already in the country to review progress in the first quarter.



According to independent analysts, the failure was more because of inability of the federal government to implement its decisions than because of the FBR, which was making efforts to meet the target.

The FBR did show a healthy growth of 19% in October but it was far short of the required rate of over 28% needed to hit the annual target of Rs2.475 trillion.

Overall, tax revenues stood at a net Rs635 billion in the first four months (July to October) of the current fiscal year, an increase of about 17% over the corresponding period last year, according to provisional data. Gross revenues were Rs659 billion, of which Rs24 billion was paid in refunds.

According to breakdown, gross income tax collection in the four months was Rs220 billion. Almost half of the total gross taxes or Rs324 billion was collected on account of sales tax, indicating the increasing burden on all classes, irrespective of whether someone was poor or rich. Apart from these, Rs44 billion was received on account of federal excise duties and Rs71 billion was collected as customs duties.

Tax authorities were apparently resorting to measures like blocking of refunds to taxpayers to overcome the shortfall. From July to October, the FBR paid only Rs24 billion in refunds, which were Rs6 billion or 20% less than the amount paid back in the same period last year, according to a senior FBR official.

The FBR has already asked its field formations to clear refunds only after achieving their tax targets, which experts say is a breach of trust of the taxpayers.

Talking to The Express Tribune, FBR Chairman Tariq Bajwa defended his organisation’s performance, saying the FBR was notching up about 19% growth in tax collection despite some of the policy measures could not be implemented.

The FBR has not yet begun receiving the income support levy and the date of submitting income tax returns has already been extended by one month, said Bajwa.

In June this year, the government had imposed the levy at a rate of 0.5% of the value of moveable assets. However, the business community opposed the levy, forcing the government to take back its decision.

Industrialists were also fiercely opposing the move to give the FBR online access to bank accounts of depositors. Despite introducing the law, the FBR has not yet come up with rules to make the law operational.

However, Bajwa said provincial courts have granted a stay order against access to bank accounts, a statement which was contrary to what the FBR stated 48 hours ago when it attributed the delay to lack of political will.

Bajwa said imports were declining significantly due to slowdown in economic activities, resulting in a dip in revenue collection at the import stage. Customs duties and sales tax are collected at the import stage in addition to withholding taxes.

A major drive against big tax dodgers has already collapsed following protests by the influential people.

Published in The Express Tribune, November 1^st, 2013.

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