Government misses tax collection target by wide margin

Rs70 billion shortfall occurs due to advances taken in last fiscal year

ISLAMABAD: In what appears to be an embarrassing result, the government has missed the quarterly tax collection target by a wide margin of Rs70 billion due to unparalleled advances it took in the last fiscal year to inflate collection and a ‘de-motivated’ bureaucracy.

Despite setting a low target, the Federal Board of Revenue (FBR) provisionally collected Rs616 billion during the July-September quarter of this fiscal year -falling short of the target by about Rs70 billion, according to officials.



In terms of growth, the collection was hardly 2.6% more than the taxes the FBR pooled in the same quarter of the last fiscal year.

The government Friday also extended the date for filing of income tax returns by individuals and companies by one month to October 31 after only 92,000 people filed their income tax returns for the tax year 2016.

For the current fiscal year, the parliament approved an annual target of Rs3.621 trillion and the FBR aimed to collect about 19% of it in the first three months.

The FBR needed 14.4% growth rate over its last year’s collection of Rs600 billion to hit the quarterly goalpost of Rs686 billion. The FBR had also failed to achieve its first-quarter target of the last fiscal year, which eventually led to introduction of many mini budgets and increase in tax rates on petroleum products to bridge the shortfall.

The chances of an immediate mini-budget are not very high as the force behind such moves - the International Monetary Fund - is no more there after its $6.2-billion programme expired this week.

The Rs70 billion shortfall was far more than envisaged by the tax authorities, although it set a low collection target. This has come despite the claims of Finance Minister Ishaq Dar that the FBR would collect an extra Rs100 billion during the current fiscal year due to recent changes in property valuation rates. The Rs100 billion was not part of the budget estimates.



Reasons

The Rs250 billion advances that the FBR obtained during the fiscal year 2015-16 was the primary reason behind missing the target, according to FBR officials. They said that in order to meet fiscal year 2015-16 tax collection target of Rs3.104 trillion, the FBR took advances for the next six months from oil & gas, telecommunication and banking companies. In some cases, it took advances up to March 2017.

The FBR did not change its habit. It again took advances from the National Bank of Pakistan and electricity distribution companies to post a collection figure of Rs616 billion, said sources.

The other reason for missing the target was retaliation by the field staff against top management and de-motivation, added the sources. The FBR had promised to give cash awards and vehicles to Inland Revenue Service field staff as an incentive for achieving last fiscal year’s collection target, said the sources.



However, the FBR chairman, who belongs to the Customs Group, did not fulfil his promise despite the fact that the FBR ‘achieved’ last year’s revenue collection target, said sources. Due to these reasons, the FBR field formations did not work hard this time around, they added.

The FBR chairman was not available for comments.

Other officials insisted that the shortfall occurred due to the government’s decision not to further increase taxes on petroleum products. They said that the FBR took a hit of Rs20 billion during the last three months due to this reason.

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

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.