Dar annoyed over poor tax collection, seeks answers

Top hierarchy at tax machinery refuses to take responsibility, says government gave ‘liberal tax concessions’

ISLAMABAD: Finance Minister Ishaq Dar showed annoyance over the poor performance after his team missed the annual collection target by about Rs250 billion. However, tax authorities have refused to take the full responsibility.

Dar called the taxmen in his office - situated in Q Block of Pak Secretariat - to review the performance for fiscal year 2016-17 that ended on Friday. Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan and outgoing Federal Board of Revenue (FBR) Chairman Dr Mohammad Irshad attended the meeting along with senior officials of the Ministry of Finance.

The FBR provisionally collected Rs3.352 trillion against the parliament-approved tax collection target of Rs3.621 trillion. The figure is still expected to improve by about Rs30 billion once final figures are available. Still, the FBR would miss its annual target by Rs250 billion.

The finance ministry officials said that Dar grilled taxmen for their poor performance, as he was expecting tax collection of at least Rs3.421 trillion. The finance minister was informed that the final revenue figures were being compiled and a final position would emerge in the next few days, according to an official handout of the finance ministry. Dar instructed the FBR officials to expedite the process and ensure that all the amounts deposited up to June 30, 2017 were duly accounted for, it added.

However, during the meeting the top FBR hierarchy refused to take the full responsibility, said the officials. They argued that “liberal tax concessions” given by the federal government after the announcement of the budget in June last year severely dented tax collection.

The government changed the tax structure for fertiliser, textile and a couple of other sectors after setting the Rs3.621 trillion tax collection target.

They said that the finance minister had high expectations from the FBR despite tax concessions worth almost Rs200 billion. The finance minister was also informed that the provinces did not pay due taxes particularly receipts from the contractors.

On May 26, Dar had revised the FBR’s tax collection target downward by Rs100 billion to Rs3.521 trillion. But even this revised tax collection target was missed by a wide margin.

Another reason, which was not discussed in the meeting, was the race between the Q Block and the FBR Headquarters to get advances from government-owned corporations to meet their own targets. The Q Block was seeking advance dividends to meet shortfall against its non-tax revenues. The FBR was pressurising the same companies to pay them advance taxes, the officials said.

The Q Block won. Officials said that the Q Block managed to get an extra Rs60 billion to Rs70 billion advance dividends from the government-owned companies. This created cash flow problems for these companies, which could not ‘accommodate’ FBR demands.

However, despite these issues the FBR cannot be fully absolved from its responsibility. The tax authorities could not collect due taxes from the cigarette manufacturing companies and took a hit of about Rs40 billion on its revenues.

Secondly, the FBR has serious capacity and reputation issues. The FBR team was also not working as one unit and some of its members were taking directions from outside FBR headquarters. The FBR’s administration remained weak, as it could not broaden the extremely narrow tax base.

The advance taxes taken in fiscal year 2015-16 also affected the FBR’s revenue collection.

The FBR never owned the tax collection target of Rs3.621 trillion. Same is the case for this fiscal year tax target; for FY2017-18, the government has set a collection target of Rs4.013 trillion, which is Rs125 billion higher than what the FBR had proposed.

The finance ministry also did not clear the air about the appointment of the new FBR chairman after a two-month extension in the service of Dr Irshad ended on June 30. There were few people who did not contribute or let others to contribute to their potential.

The finance minister has not yet announced a new chairman, although the name of his close confidant Tariq Pasha is making the rounds. Pasha currently wears three hats - Special Assistant to Finance Minister, Secretary Economic Affairs Division and Secretary Statistics Division.

Published in The Express Tribune, July 2^nd, 2017.

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