FBR close to meeting outgoing year’s tax target

Govt resorted to pleas for advance taxes, withholding refunds to meet goalpost

ISLAMABAD: The government on Thursday ‘managed’ to collect about Rs3.1 trillion in taxes after it blocked genuine refunds of taxpayers and obtained allegedly unlawful advances of over Rs100 billion aimed at claiming a victory on the tax collection front.

Sources said that until 11.40pm, the Federal Board of Revenue generated Rs3.095 trillion in taxes and was trying to collect another Rs9 billion to hit the Rs3.104 trillion goalpost for the outgoing fiscal year.

“We are expecting to achieve the annual target of Rs3.104 trillion and the final figure is likely to be announced on Friday (today),” said Federal Bureau of Revenue spokesman Dr Mohammad Iqbal.



It was unusual that the FBR was stopped by the finance minister from releasing tax collection figures, highlighting his policy of micromanagement. The collection figure FBR will announce today will include over Rs250 billion in taxpayers refunds and over Rs100 billion advances.

The government had to resort to arm-twisting measures to come close to the revenue target, despite fleecing petroleum product consumers by charging more than standard sales tax rates and taking unprecedented mid-year additional tax measures. Last June, the National Assembly approved a Rs3.104 trillion tax target for 2015-16 which ended on Thursday. The December mini-budget was one of the most regressive in years as the government imposed customs duties and sales tax on previously exempted items.

However, after dismal performance, the government not only increased sales tax on high speed diesel up to 108% of the value at one time but also levied regulatory duties and 1% extra customs duty on thousands of items, not even sparing food items like pulses.

The credit of 2015-16 tax collection also goes to Petroleum Minister Shahid Khaqan Abbasi who asked government-owned oil and gas companies to pay advance tax to the government, sources said. Top government functionaries approached him to bail out tax authorities.

Abbasi denied that his ministry played such a role. “Advance tax is an issue, based on tax laws, between FBR and the companies, and my ministry does not get involved in such matters,” he said when asked.



In 2015-16, growth in payments of refunds remained negative by over 18%. FBR paid only Rs54.5 billion tax refunds in 2015-16 against Rs66 billion paid in the preceding year. This shows that whatever FBR claimed to collect in taxes was not all state’s money. In June, the government paid just Rs1.3 billion in tax refunds.

In one of the largest clandestine operations, FBR took over Rs100 billion in advance taxes from oil and gas, telecommunication and banking companies to come closer to the annual target. The exact amount of advances could not be determined till the filing of the story.

Experts have demanded the AGPR and SECP probe the affairs of FBR and those companies that paid taxes in advance, which are over and above required under the law. They said the money that the companies were paying in advance belonged to shareholders and directors of such companies should be penalised for this breach of trust.

Only Large Taxpayer Unit Islamabad (LTU) Islamabad obtained about Rs35 billion advance taxes after June 15, which is the due date for paying lawful advance income tax. It got Rs5 billion in advance tax from Pakistan Tobacco Company. The Oil and Gas Development Company Limited (OGDCL) was forced to pay Rs11 billion, although initially it was asked to pay Rs22 billion. LTU Karachi also obtained advances after June 15, said the sources.

The huge advances will adversely affect FBR’s collection for July and August, as companies have been promised that they would get back their money in the first couple of months of 2016-17, sources said.

Independent economists as well as international financial institutions are urging the government to introduce meaningful reforms in the tax machinery instead of forcing people to pay advance taxes and withholding their genuine refunds.

 

Published in The Express Tribune, July 1^st, 2016.