Tax collection growth sluggish in July

With an increase of only 4.7%, the FBR collected Rs156b

ISLAMABAD: The tax collection drive is off to a bumpy start as the growth in revenues in the first month of new fiscal year remained sluggish due to the heavy advances taken last month to meet the target of previous fiscal year.

By the evening of Friday - the last working day of July, the Federal Board of Revenue (FBR) had provisionally collected Rs156 billion, only Rs7 billion or 4.7% more than the collection made in the same month of previous fiscal year.



The key reason for the sluggish growth was the unprecedented heavy tax advances taken by the government in June.

In a bid to meet last fiscal year’s Rs3.104 trillion tax collection target, the FBR took Rs230 billion in advances from June 20 to 30, said sources in the Pakistan Revenue Automation Limited. The companies that paid these advances got some of the amount adjusted against July payments.

The subdued growth is expected to continue in August as well due to the same reason.

The Rs156-billion collection, which may slightly go up once final figures are available, is only 4.3% of the annual tax collection target of Rs3.621 trillion for fiscal year 2016-17. The FBR has not yet officially set the monthly collection targets.

The FBR claimed that it collected Rs3.112 trillion in the last fiscal year. It needs a 16.4% growth to achieve the new fiscal year’s Rs3.621 trillion target.



Although the FBR did not declare any target for July, it should have collected at least Rs174 billion in the month to get a good start.

The FBR had also taken heavy advances in 2014-15, which resulted in a gap of Rs40 billion in collections in the first quarter of next fiscal year. To fill the gap, the government introduced at least five mini-budgets.

Refunds

Another depressing trend in July was the negative growth in refund payments, suggesting Finance Minister Ishaq Dar may not fulfil his promise of clearing all the pending refunds by August 30.

Against Rs14.8 billion paid in refunds in July 2015, the FBR paid only Rs8.6 billion in July this year, a decline of 41.9%.

In his budget speech in the National Assembly, Dar had said, “all the pending sales tax refund claims till April 30 will be paid by August 31, 2016.”

Blocking taxpayer refunds has become a chronic issue with fresh allegations emerging that the FBR has blocked over Rs250 billion worth of refunds as part of an effort to achieve the previous fiscal year’s tax collection target.



“The delay in clearing refund claims is a political matter and it is being dealt with by the finance minister,” Karachi Chamber of Commerce and Industry’s GST and Refund Sub-committee Chairman Shoaib Ahmad Farid had alleged while appearing before a committee.

The Federal Tax Ombudsman had constituted the committee headed by Dr Akramul Haq, Advocate Supreme Court of Pakistan and a leading tax expert.

Haq report stated that the tax authorities were showing gross collections whereas it should actually be net collection after deducting the refund claims. The approval to issue refund cheques was obtained from the finance minister, the report added.

Published in The Express Tribune, July 30^th, 2016.

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