FBR misses tax collection target by at least Rs80 billion

Receives Rs1.1tr in first four months of FY19, up 6.7% from last year

ISLAMABAD: The Federal Board of Revenue (FBR) could collect only Rs1.1 trillion in taxes in first four months of the current fiscal year and fell short of the target by Rs100 billion, suggesting Pakistan’s tax problems may not end soon.

The Rs1.1-trillion tax collection in the July-October period was Rs70 billion or 6.7% higher than the collection in the same period of previous fiscal year. But the provisional collection missed the desired pace.

The FBR has claimed that it has discontinued the practice of taking advances to fill the revenue gap.

Since the FBR has not yet announced the revised monthly targets, the Rs1.1-trillion collection was short of the original goal by Rs100 billion. In case of revision in the targets, the four-month shortfall will come down to nearly Rs80 billion.

In October alone, the provisional collection fell short of the target by Rs38 billion, according to sources in the FBR. Tax receipts for the month stood at Rs273 billion, which was merely Rs3 billion or 1.1% higher than October last year. The monthly target was Rs311 billion.

A less than 7% growth in revenue collection should set off alarm bells as the pace was even lower than the projected nominal gross domestic product (economic growth plus inflation) growth of 12%.

During July-October of the last fiscal year, the FBR had collected Rs1.034 trillion.



The July-October 2018 tax collection showed that the PTI government had to move swiftly to address structural and administrative issues being faced by the tax department. The government has notified the Tax Reforms Implementation Committee for suggesting short- to medium-term reforms.

The government has not yet announced anticipated changes at top and mid-tiers of the FBR. The delay has caused uncertainty in the tax department.

In September, parliament approved a mini-budget and lowered the FBR’s annual tax collection target by Rs37 billion to Rs4.398 trillion. The FBR hoped that since the government had notified new tax measures in the mini-budget, there would be no shortfall in remaining nine months of the current fiscal year.

However, the first four-month results showed that in the first year of the PTI government, the country’s fiscal woes may not end.

Even if the FBR manages to achieve the Rs4.4-trillion tax target, this will not be sufficient to restrict the budget deficit to 5.1% of GDP, said sources in the finance ministry.



FBR officers blame the shortfall on slowdown in the economy, income tax relief given to the salaried class and contraction in taxable imports due to heavy regulatory duties. The slow release of funds for the Public Sector Development Programme also affected the FBR’s tax collection from contractors.

The Supreme Court’s decision to stop the FBR from collecting advance tax on mobile phone calls and reduction in sales tax on petroleum products also impacted the tax collection, according to the FBR authorities.

The FBR has estimated an adverse impact of Rs45 billion on its revenues in the first four months due to the relief measures introduced by the last PML-N government. However, at least Rs20 billion will be recovered during the course of the fiscal year after parliament approved an increase in income tax on higher income groups with effect from July this year.

But the FBR said taxes received in the treasuries of remote areas may further swell the revenue collection for October.

The FBR’s collection also got affected by the extension in the deadline for filing income tax returns/statements by the companies which were required to file returns by September 30, 2018 and the salaried individuals which were required to file returns till November 30, 2018.

The FBR said on Wednesday it was facilitating the taxpayers by allowing payments online. The FBR recorded 14,904 transactions and received Rs12.2 billion from the taxpayers opting to use the always-on alternative delivery channels, ie ATM, online banking, phone banking and contact centres, for the payment of federal taxes, including income tax, sales tax, customs duty and federal excise duty, it added.

 

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

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