EAC meeting: Revised tax target also difficult to meet, says FBR

Chairman says Rs2.691t collection hinges on vacating courts’ stay orders

ISLAMABAD:

Just days after revising downward the tax collection target to Rs2.691 trillion, the federal government said on Saturday that even the revised target’s achievement hinged on the authorities’ ability to get the stay orders vacated against two major revenue spinners.

If the stay orders were not vacated in time, tax collection would remain as low as Rs2.660 trillion, said Federal Board of Revenue Chairman Tariq Bajwa.

He was giving a presentation on the state of revenue collection in a meeting of the Economic Advisory Council (EAC). The EAC is a consultative body of economists which is headed by Finance Minister Ishaq Dar.

Bajwa’s candid admission indicates that there are bleak chances that the FBR would hit even the revised goalpost, making 2014-15 yet another year of failed targets.

At the conclusion of sixth review talks between Pakistan and the International Monetary Fund (IMF), the IMF agreed to reduce the FBR’s tax collection target to Rs2.691 trillion against the original target of Rs2.81 trillion.

Besides reducing the tax target by Rs119 billion, the government has so far introduced three mini-budgets in the past few months to raise an additional Rs50 billion for achieving the new tax target.

The achievement of the Rs2.691-trillion target depends on whether the FBR’s assumptions become true by the end of the fiscal year, said the FBR chairman.

In June last year, the federal government had slapped 5% income tax on bonus shares aimed at raising a minimum Rs15 billion in revenues. Banks, however, took stay orders from the courts. The Supreme Court of Pakistan had directed to settle the bonus share issue by January 15 or else the case will be settled in favour of the government. The courts could not take a decision and technically the government has won the case.

The government had also imposed Gas Infrastructure Development Cess (GIDC) in the budget, which was also stayed by the courts. On GIDC, the FBR has calculated Rs16 billion in sales tax, which has not been materialised yet.

“The time is on our side and we will be able to get the stay vacated before the close of the financial year,” said Finance Minister Ishaq Dar while talking to The Express Tribune.

However, the EAC Convener, former Governor State Bank of Pakistan Dr Ishrat Husain, said that the achievement of the revised target would depend upon the effective implementation of the new tax measures.

The government’s decision to overburden the existing taxpayers has increased the cost of doing business, making the industries uncompetitive.

Dr Ashfaque Hasan Khan, a member of the EAC, suggested to the government to improve e-filing of income tax returns. He said his assumption was that the FBR’s revenue collection would remain in the range of Rs2.550 trillion to Rs2.6 trillion.

There was also a heated debate on the issue of the government’s decision to give subsidies on export of wheat and determination of wheat support price. The majority of the EAC members wanted that the government should come out of the business of wheat support price.

Secretary Finance Dr Waqar Masood said that in addition to surplus stock of the previous year, the wheat production may remain close to 26 million tons. Dar is said to have told the EAC that the federal government was picking the subsidy under political compulsions.

It was discussed that inflation has been stable and economy is expected to grow around 5% which will be a hallmark achievement, according to a handout issued by the Finance Ministry.  However, according to some members of the EAC, the country has already entered into a period of deflation. The finance minister and Dr Ishrat did not agree to it and insisted that it was a period of low inflation.

The meeting was also apprised about the recent measures for shifting short-term borrowing towards long term. The members complained that the finance ministry did not present a full picture. They accused it of deliberately hiding the facts about shifting borrowings from the central bank to commercial banks, creating liquidity crunch in the market.

Published in The Express Tribune, February 22^nd, 2015.

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