New taxes worth Rs132 billion are on the cards to achieve an overambitious annual tax target of Rs1.667 trillion for FY 2010-11, say officials in the Federal Board of Revenue.
These officials say the government will take some new measures on the income tax front that may fetch in an additional Rs45 billion during the next financial year.
The income tax target for the next financial year is estimated at Rs640 billion, which will be 38.4 per cent of the total tax target, say sources. For the current fiscal, the government fixed the income tax target at Rs557 billion. The remainder of Rs1.027 trillion is to be collected through indirect taxes – Value Added Tax, Federal Excise Duty and Customs levies.
Earlier, the government had estimated next year’s tax target at Rs1.7 trillion. However, sources say, due to less-than-targeted collection during the current year and the Revenue Advisory Council’s insistence on setting a realistic target, authorities were considering pegging the target lower – at Rs1.667 trillion.
The government was planning to generate an additional Rs17 billion through new Customs Duty measures. And the authorities are counting on collecting Rs70 billion from Value Added Tax.
Of the Rs1.667 trillion, some Rs200 billion will be collected through Customs Duty. For the current fiscal, the Customs Duty target was set at Rs167 billion that has been revised downwards to Rs 120 billion.
In addition to new tax measures worth Rs132 billion, the government hopes to generate Rs 40 billion by plugging in tax leakages and by improving the efficiency of the FBR, say sources.
Of these Rs 40 billion, Rs15 billion are expected to be collected under the head of income tax. As much as Rs5 billion is expected to come in from Federal Excise Duty and Rs20 billion from Customs Duty.
The FBR is also planning to open five new Regional Tax Offices during the next fiscal year. Two RTOs will be established in Karachi and one each in Lahore and Sargodha. In addition, 85 tax facilitation centres will be converted to enforcement centres aimed at improving tax compliance.
The Rs1.667 trillion tax target is based on the assumption that the FBR will manage to collect Rs1.335 trillion during the current financial year. The tax target for the current fiscal year ending on June 30 is Rs1.38 trillion, a mark the tax authorities are expected to miss by a wide margin.
The FBR collected Rs93 billion in taxes till May 28, against the target of Rs 124 billion. A senior FBR official said the authorities were expecting to collect at least another Rs20 billion by May 31.
Including the May figures, the FBR has collected Rs1.113 trillion in taxes during 11 months of the current fiscal year. To achieve even the Rs1.335 trillion revised target, it will have to collect more than Rs 205 billion in June.
FBR officials also said that if the federal government’s differences with Sindh and Punjab over the integrated Value Added Tax could not be resolved, the government would have to increase the rate of sales tax from 16 per cent to 17 per cent. This move, it is expected, will net the government over Rs31 billion. Moreover, it is also expected that in such a situation, the government will withdraw all sales tax exemptions.
Published in the Express Tribune, May 31st, 2010.