10-month performance: FBR falls short of tax collection target by Rs100b

Receives Rs1.975t in July-April 2014-15 against Rs2.075 trillion

ISLAMABAD: A further steep cut in the development budget is imminent, as tax authorities have failed to achieve even the downward revised 10-month revenue collection target and fallen short of the goal by Rs100 billion, highlighting the urgency of reforms in the tax machinery.

Against the July-April 2014-15 thrice revised tax collection target of Rs2.075 trillion, the Federal Board of Revenue (FBR) could collect Rs1.975 trillion, according to provisional results compiled by the authorities till Thursday evening. In April alone, the FBR could pool only Rs200 billion, said officials.

The IMF had given Rs1.846 trillion tax target to the FBR for the first nine months but the FBR could collect only Rs1.775 trillion, a gap of Rs71 billion. The shortfall further widened by Rs30 billion in April as the FBR collected Rs200 billion against the monthly target of Rs230 billion.

It achieved 13% growth in revenues from July through April, which is not sufficient to reach the annual target of Rs2.691 trillion. In the July-April period of last fiscal year, the FBR had pooled Rs1.745 trillion in taxes.

Despite the resistance put up by FBR Chairman Tariq Bajwa, the government had given the Rs2.810 annual target for the current fiscal year. After seeing the dismal performance, it first revised the target to Rs2.756 trillion and then to Rs2.691 trillion.

Besides lowering the target, the government has so far imposed five mini-budgets in an attempt to touch the revised figure. The indications are that the FBR may collect Rs2.6 trillion at best, said a senior official.



He said the authority was using the Rs2.6 trillion base for determining next year’s tax collection target. The official said Finance Minister Ishaq Dar was repeating the same mistake and despite the opposition, he wanted to fix the target at Rs3.2 trillion for fiscal year 2015-16.

The FBR’s Rs1.975 trillion tax collection includes Rs220 billion refunds that it has withheld to inflate its revenues. These include Rs120 billion on account of sales tax refunds.

Textile sector suffering

“The country’s exports cannot grow until the FBR starts paying back sales tax refunds,” said Trade Development Authority of Pakistan Chief Executive SM Muneer, in a meeting of the Public Accounts Committee on Wednesday.

Muneer said he had met with the FBR chief who acknowledged that the FBR owed Rs120 billion sales tax refunds but was not doing enough to pay back the money. He said the FBR has given only Rs20 billion cheques, which can be encashed after three months.

He said that due to the blocking of refunds, the textile sector was facing severe working capital requirement issues.

By excluding Rs220 billion taxpayer refunds, the net collection for the period of July-April would come down to Rs1.775 trillion, showing only 1% growth over the comparative period’s collection.

Due to this shortfall in tax revenues, the government released only Rs304 billion for development spending during the July-March period, Rs65 billion short of the nine-month target, being worked out on the basis of Rs525 billion annual development budget.

In a testimony to PAC, Secretary Finance Dr Waqar Masood had said that the actual development spending during the current fiscal year would depend on FBR’s performance. He said for the government, the 4.9% budget deficit target was sacrosanct.

However, the first nine-month results show that the government would miss its annual budget deficit target by a wide margin due to a shortfall in tax revenues. The deficit in the July-March period stood at 3.6% of GDP.

Published in The Express Tribune, May 1^st,  2015.

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