ISLAMABAD: The Rs68-billion shortfall in tax revenues in just four months of the current fiscal year has set alarm bells ringing as Finance Minister Asad Umar fears that the International Monetary Fund (IMF) may ask Pakistan to impose new taxes if corrective measures are not taken immediately.
In spite of the difficulties being faced on the tax front, Prime Minister Imran Khan has not lost trust in Federal Board of Revenue (FBR) Chairman Jehanzeb Khan. The premier on Thursday took a briefing from the FBR and reposed his confidence in the chairman, sources told The Express Tribune.
However, the finance minister again expressed his displeasure over the state of affairs during the briefing, the sources added. Umar voiced concern that if the FBR’s performance did not improve, the IMF may ask Pakistan to come up with new tax policies to achieve the revenue target. “The government’s success and failure hinges on the FBR’s performance,” said Umar while speaking to Aaj TV after the meeting.
He said the prime minister was given a briefing on the new initiatives taken by the FBR to curb smuggling, catch tax dodgers and use technology to enhance revenues.
It was the second time in the past eight days when the finance minister expressed dissatisfaction over the FBR’s performance. Earlier, he rejected the excuses given by FBR authorities over the poor results during a visit to the FBR headquarters.
The minister also said the government would separate tax policy from operations and a tax policy board would be constituted.
The FBR could collect only Rs1.1 trillion in taxes in first four months of the current fiscal year and fell short of the revised target by Rs68 billion. The growth in revenue collection was less than 7%.
The only silver lining was the increase in customs duty and regulatory duty collection as there was a shortfall in all other taxes. The receipt of some taxes even fell below last year’s levels including sales tax at the domestic stage.
The PM was assured that the shortfall would be recovered by collecting additional revenues by settling the cases stuck in litigation and through effective audit of the taxpayers. However, the FBR had made similar promises with the last government but it could not achieve the desired results.
For the current fiscal year, the government has already revised downward the annual target to Rs4.398 trillion. The FBR is falling behind its goals at a time when an IMF team is in the town to negotiate a loan programme. The IMF’s technical staff visited the FBR on Thursday and held discussions on the revenue collection issues.
The finance minister also held telephonic discussions with the IMF’s Washington-based mission chief Harald Finger who has not yet reached Pakistan. Umar said the discussions centred around giving further autonomy to the State Bank of Pakistan and legally binding the government to take limited loans to avoid debt trade.
Speaking to Aaj TV, the finance minister said Harald Finger raised the issue of addressing Pakistan’s energy-sector problems.
During the briefing, the PM was informed that Customs authorities had enhanced enforcement measures, which led to the seizure of Rs36 billion worth of goods in the past 15 months.
Over Rs11.4 billion worth of goods were seized in the first quarter of FY19 due to increased enforcement measures. This was triple the value of goods confiscated in the same period of previous fiscal year.
The Customs has also installed currency declaration systems at all the 24 border crossing points. Soon, the FBR and the Federal Investigation Agency will start sharing data to curb currency smuggling. The government has promised to double tax collection and expand the narrow tax base, which currently comprises only 1.4 million active taxpayers. As part of its campaign, the FBR has started serving notices to non-filers of income tax returns.
However, the campaign’s results are not very promising and the FBR faces serious challenges to catch the tax dodgers. The FBR’s Directorate General of Broadening the Tax Base, which is responsible for going after unregistered persons, has completed a survey of over 2,000 commercial and residential plazas.
Its results showed that thousands of units were sold without even collecting withholding taxes. In certain cases, the value of these apartments was massively understated. For instance, four residential apartments in posh areas of Islamabad were shown to be sold for Rs8.2 million.
These discrepancies are now pending before the Regional Tax Offices for next action.
Published in The Express Tribune, November 9th, 2018.