President promulgates sales tax ordinance 2014 as FBR falls short of collection target again

Tax collection falls short of the Parliament’s approved target but remains in line with the IMF’s projections.


Web Desk/shahbaz Rana March 31, 2014
Pulled by indirect taxes, the Federal Board of Revenue (FBR) collected Rs1.573 trillion in taxes from July through March of the current fiscal year. PHOTO: FILE

ISLAMABAD: President Mamnoon Hussain on Monday promulgated the Sales Tax (Amendment) Ordinance 2014, Radio Pakistan reported Monday evening.

The Ordinance levies and proposes to collect sales tax at the standard rate of 17 percent from CNG stations through their gas bills by the gas distribution companies.

The Federal Board of Revenue in a statement clarified that no new tax has been imposed under this Ordinance, and only the mode of collection has changed.

It said the rate and amount of sales tax payable on CNG remains the same as already notified by the Oil & Gas Regulatory Authority (OGRA).

Tax collection Rs210 billion short of target

Amidst politically-motivated concessions extended so far by the government, tax authorities reported a collection Rs1.57 trillion in the first nine months of the fiscal year. However, they fell short of the Parliament’s approved target but remained in line with the International Monetary Fund’s (IMF) projections.

Pulled by indirect taxes, the Federal Board of Revenue (FBR) collected Rs1.573 trillion in taxes from July through March of the current fiscal year, higher by Rs219 billion or 16% over the collection made in the comparative period of last fiscal year, said Shahid Hussain Asad, Member Inland Revenues of the FBR.

However, the collection was Rs210 billion short of the target, on the basis of Rs2.475 trillion target, approved by the Parliament in June last year. The IMF has already downward revised the annual target to Rs2.345 trillion. They had accurately assessed that the FBR would raise Rs1.567 trillion in nine months.

Since assuming power in June last year, Nawaz Sharif's PML-N led federal government has accepted 26 demands made by the business community, as admitted by Finance Minister Ishaq Dar in the presence of Prime Minister Nawaz Sharif. These concessions, mainly relaxing documentation clauses, work against the principles of taxation, according to sources.

For instance, in case of beverages industry, in order to give benefit to the PML-N’s three financiers the federal government forced the FBR to change the regime, which in first eight months caused over a billion rupee loss to the exchequer. Instead of posting any growth, the collection from beverages fell Rs500 million short of last year’s collection, according to the FBR.

The inefficiency and rampant corruption in the FBR were the other main reasons for massive shortfall in tax targets. Due to the less than targeted collection, the federal government has already cut the development budget by Rs115 billion.

The FBR also pointed out to Finance Minister Ishaq Dar that his ministry had been unable to publish the tax directory of all the taxpayers till March 30. The tax directory deadline has been extended for two weeks, as it is a cumbersome exercise to publish the accurate data of 890,000 taxpayers, said Asad.

During the first nine months, the FBR collected Rs742 billion in sales tax, Rs119 billion or 19% above the previous year. The IMF had assessed that the FBR would raise Rs708 billion in sales tax. The FBR surpassed IMF’s projections as it has blocked over Rs90 billion genuine tax refunds, according to sources.

The tax authorities collected Rs597 billion in income tax, up by Rs52 billion or almost one-tenth of last year’s collection, said Asad. The IMF had estimated Rs591 billion income tax collection.

However, on account of customs duties, the FBR’s collection fell even behind the IMF’s conservative assessments. The FBR collected Rs170 billion in custom duties, Rs8 billion or 5% less than the last year’s collection. The IMF has estimated Rs178 billion customs duties.

The federal excise duties collection stood at Rs109 billion against Rs83 billion from last year, showing a 31% growth, said Asad.

COMMENTS (3)

Yousaf | 9 years ago | Reply

Instead of cutting development budget Why didn't they axe defense budget as v not using army anywhere

Ali | 9 years ago | Reply

More indirect taxes. The ruling elite continues to enjoy the free ride while the masses will suffer.

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