In rare development, tax collection remains on track

FBR records collection of Rs449 billion during July and August, growth healthy to meet 2017-18’s target

ISLAMABAD: Tax authorities managed to keep a healthy momentum of growth in revenue collection in the second month of the ongoing fiscal year, as collection stood at Rs449 billion — higher by about 23% and enough to remain on track.

From July through August of fiscal year 2017-18, the Federal Board of Revenue (FBR) collected Rs449 billion, Rs83 billion or 22.8% more than the collection made in the same period last fiscal year, according to officials.



To achieve the annual target of Rs4.013 trillion, the FBR needs 19.4% growth over the last year’s final tax collection of Rs3.362 trillion. The FBR had missed last fiscal year’s target by a wide margin of Rs259 billion.

Unlike the previous months, the FBR also paid around Rs24 billion in tax refunds, although the quantum of sales tax and income tax refunds is still over Rs200 billion.

One of the main reasons behind the double-digit growth in revenue collection was imposition of heavy regulatory duties on over 508 imported goods that Finance Minister Ishaq Dar announced in his budget speech. However, the sales tax collection at the domestic stage still remained a problematic area for the FBR.

Another reason for the improved performance was the government’s decision to increase petroleum products prices that have started to create a positive impact on revenue collection. Among the key reasons behind missing the previous fiscal year’s tax collection target of Rs3.621 trillion were low oil prices and the government’s decision to change tax policies during the course of the fiscal year.

The Rs449 billion also includes about Rs30 billion payments of withholding taxes by the provinces that, in the past, used to be booked in June collection but this time the FBR booked in July.

The FBR has started delivering at a time when Prime Minister Shahid Khaqan Abbasi has kept a close watch on the Revenue Division. In his first speech after being elected as prime minister, Abbasi had vowed to address the weaknesses in the tax system.

This week, the premier was briefed on revenue performance by Finance Minister Dar - unlike his predecessor, Nawaz Sharif, who never reviewed FBR’s performance and left matters on Dar.

The premier asked the tax authorities to enhance collection by primarily relying on their own efforts instead of blocking taxpayers genuine refunds and taking heavy advances from the government-owned institutions and commercial banks, said the sources.

In August alone, the FBR generated Rs237.5 billion, which was about Rs2.5 billion less than its monthly target. However, in July, the FBR outperformed and generated roughly Rs212 billion, which was higher than its monthly target.

The FBR’s revenue is increasing largely on the back of indirect taxation, as the government has not yet introduced much-desired policies and administrative reforms.

The FBR also notified a total 8% sales tax on finished garments importer by the commercial importers.

The government had constituted the Tax Reforms Commission to overhaul the plagued tax machinery and plug lacunas in the law. But the TRC’s report largely remains unimplemented and the government seems in no mood to venture into areas that demand difficult political decisions or hit the vested interests of few officials of the FBR.

The TRC has given strong recommendation to introduce trace and tracking system to plug roughly Rs50 billion annual evasions in cigarettes manufacturing sector. But the FBR has been using delaying tactics in completing the bidding process for hiring parties to install the tracking systems in jurisdiction of cigarettes manufacturing factories.

Return filers date extension

After remaining unable to timely finalise the income tax return forms, the federal government on Thursday gave a one-month extension in filing the returns by salaried individuals for the tax year 2017 ended in June.

Finance Minister Ishaq Dar extended the due date till September 3- on the on the basis of requests received from tax bars and different associations, as a number of tax consultants have gone to Saudi Arabia to perform Hajj, according to the Finance Ministry handout.

The Finance Ministry’s statement was silent about the FBR’s own inefficiency.

Published in The Express Tribune, September 1^st, 2017.

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