FBR bags Rs580b, but falls short by Rs70b

Despite tax hikes, provisional data reveals tax machinery fails to meet target

ISLAMABAD:

There were no surprises as data compiled by the Federal Board of Revenue (FBR) showed that the tax machinery fell short of its first-quarter collection target by a whopping Rs70 billion, forcing the government to further increase general sales tax (GST) rate on high speed diesel to an unprecedented level of 50%.

The government increased the rate of GST from 45% to 50% to collect an additional Rs7 billion in revenues. It is the third such raise in as many months aimed at minimising the gap between revenue collection and target.

However, the shortfall is yet to be bridged.

Despite applying arm-twisting tactics and obtaining about Rs20 billion advances from various institutions, the FBR could bag only Rs580 billion in taxes from July through September, according to provisional data compiled by the authorities.

The collection was a mere 7.8% or Rs42 billion higher than the collection in July-September of 2014, indicating the increases in tax rates were still not yielding the desired results and the government needed to introduce administrative changes.

Income tax returns

Meanwhile, Finance Minister Ishaq Dar on Wednesday announced an extension in the deadline to file income tax returns by a month, revising it to October 31. The change comes due to Eid holidays in September and FBR’s inability to resolve technical glitches in electronic filing of income tax returns.

Coupled with this extension also came pushing ahead the deadline to implement 0.6% withholding tax on all banking transactions by another month. The current rate, on transactions valued at over Rs50,000, is 0.3%.

The standard rate of 0.6%, which the government had reduced by half through a Presidential Ordinance till September 30, aimed at encouraging people to file returns.

The Economic Coordination Committee of the Cabinet gave the extension on the reduced rate till October 31, said Dar who is also the ECC chairman. People were complaining that they were unable to file income tax returns due to problems in e-filing.

DESIGN: NABEEL AHMED

He maintained that despite opposition to the levy, the government would not withdraw the 0.6% tax. To a question about reshuffling bureaucracy in divisions working under his command, Dar did not rule out changes. “People should take these changes as a routine matter,” said Dar, while hinting at reshuffling few bureaucrats next week.

Tax collection

For the month of September, the FBR had set Rs281.7-billion target but its provisional collection stood at only Rs249 billion, according to FBR officials. The collection was just Rs14 billion or 6% up from the last September collection of Rs234.7 billion. The FBR needs a growth rate of 20% to achieve the Rs3.104 trillion annual target.

Dar admitted that the tax collection target was stretched one but ducked a question whether the government would review to revise it downward. The continuous shortfall in tax collection may also adversely affect this year’s proposed development spending of Rs580 billion.

The growing shortfall in tax revenues will likely result in missing the overall budget deficit target of 4.3% of gross domestic product or Rs1.318 trillion for the current fiscal year.

In its desperate attempts to minimise the shortfall, the government on Wednesday increased GST rates on petrol and high speed diesel. The government has already implemented Rs238.4 billon additional taxes with effect from July 1, besides introducing three mini-budgets.

The government increased the GST rate on high speed diesel, which is used in public transport, by over 11%. As against the earlier rate of 45%, the new GST rate on HSD will be 50% of the total value, the highest ever sales tax rate in the history of the country on any consumer product. Dar said that Oil and Gas Regulatory Authority (OGRA) had proposed Rs2.68 per litre reduction in diesel prices, which the government would not reduce and HSD price will remain unchanged at Rs82.04 per litre.

The government also increased the sales tax rate on motor spirit by half percentage point to 26% to absorb 15 paisa reduction in petrol prices.

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

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