Mammoth task: FBR needs to collect Rs661b more to meet tax target

From July to May of current fiscal year, it has collected Rs3.27 trillion

ISLAMABAD: The Federal Board of Revenue (FBR) has so far provisionally collected Rs3.27 trillion in taxes, leaving it with a gigantic task of generating Rs661 billion in the last month of current fiscal year to hit the revised annual target.

From July through May, the FBR recorded a provisional net revenue collection of Rs3.274 trillion, said officials in the FBR on Thursday.

The collection was Rs414 billion or 14.4% higher than the comparative period of last fiscal year as the pace of increase in revenues further slowed down. In the first 11 months of the last fiscal year, the FBR had collected Rs2.86 trillion in taxes.Parliament had approved Rs4.013-trillion tax collection target for the outgoing fiscal year. Due to continuous shortfall, the government lowered the target by Rs78 billion to Rs3.935 trillion last month.

But the results of first 11 months indicate that even the revised target is unrealistic. The FBR needs to collect another Rs661 billion to hit the target.

In June last year, the FBR had collected Rs518.3 billion and the authorities would need 28% growth this year, which is next to impossible.

The FBR officials said the authorities may collect around Rs3.8 trillion by the end of current fiscal year, which means they will miss the original target by Rs213 billion. This will widen the budget deficit by the same amount. The government had recorded Rs1.481-trillion budget deficit for the July-March period, which was equal to 4.3% of gross domestic product (GDP).

Provisional results for May coincided with the end of term of the PML-N government. When the government came to power in June 2013, the FBR’s net collection was Rs1.946 trillion, which in five years almost doubled.

However, the increase in collection entirely came on the back of almost Rs1.4 trillion in new taxes. The increase in revenue collection in five years was below the nominal increase in the size of economy, indicating the government could not stop revenue leakages because of theft by taxpayers and corruption in the tax machinery.

The chances of Rs661-billion collection in a single month are not bright because the FBR has already taken advances from state-owned enterprises and commercial banks to meet its quarterly targets, said officials in the tax machinery.

In certain cases, the FBR has taken advance income tax for the July-September quarter of fiscal year 2018-19, which is yet to begin.

In the 11-month period, the FBR has released tax refunds of Rs100 billion including Rs31.3 billion released on Thursday.

According to some estimates, the FBR has so far withheld around Rs320 billion worth of refunds of the taxpayers. But the FBR officially admits only about Rs100 billion in sales tax refunds. It does not acknowledge the income tax refunds.

In case of any shake-up at the top level in the FBR, the tax collection may further slowdown in June. There are also chances that at least one senior FBR member may be replaced, said the officials.

The provisional collection for May 2018 stood close to Rs350 billion against Rs343 billion collected in the corresponding month of previous fiscal year.

The FBR has recorded a nominal increase of Rs7 billion or 2% over the revenue collected in May 2017.

Over a period, the FBR’s reliance on indirect taxes, particularly on customs duties, is on rise. Despite downward revising total annual target, the FBR has instead further increased the customs duties collection target to Rs600 billion for fiscal year 2017-18. The upward revised custom duties target will be equal to 15.2% of the new annual target of this fiscal year. This at one time used to be less than 10%.

For the fiscal year 2018-19, the government has set the customs duties collection target at Rs735 billion, which will be equal to 16.5% of the next year’s target of Rs4.435 trillion.

A workforce of less than 6,000 of customs collect more than 52% of the total FBR’s revenues that include withholding taxes and sales tax at import stage and the custom duties. Over 16,000 Inland Revenue people collect only 48% of the total revenue, pointing towards serious structural flaw.

Published in The Express Tribune, June 1^st, 2018.

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