After missing most targets in last year’s budget, the government took its critics by surprise on the eve of the financial year’s end – claiming that it had hit the bullseye on perhaps the single most important target: Tax collection.
In a hurriedly called press conference on Thursday, the tax authorities announced that they had surpassed the revised tax collection target for fiscal year 2010-11, after missing it for the last three years.
Meeting this target has also revived hope that the suspended $11.3 billion International Monetary Fund bailout package may be restored.
“Against a revised target of Rs1,588 billion, the Federal Board of Revenue (FBR) has so far collected Rs1,590.5 billion in taxes and more receipts are coming in,” announced FBR Chairman Salman Siddique at the conference. The 2007-08 was the last fiscal year when the government achieved its tax collection target.
The recent collection brings Pakistan’s tax-to-GDP ratio to 9.2 per cent, the second-lowest in the region after Bangladesh.
The chairman said the ratio can only be increased if the government brings all sectors into the tax net.
Bona fide collections
Amid apprehensions of jugglery in figures and concerns of alleged arm-twisting, the FBR says it has achieved its revenue target in good faith.
The tax authorities collected Rs1,406.4 billion on account of income tax, sales tax and federal excise duties and Rs184 billion on account of customs duties.
The customs duties’ target was surpassed by Rs12 billion, said member customs Mumtaz Haider Rizvi.
The Rs1,590.5 billion figure, however, is Rs77 billion below the original tax collection target of Rs1,667 billion that was approved by parliament last June.
“It is bona fide collection and we would conduct an audit along with private auditors”, said the chairman in response to questions of soliciting advances from banks to meet the target.
Even the IMF would put this figure in its own auditing process, he said.
The chairman, however, admitted that the government took an advance of Rs5 billion last year from the Trading Corporation of Pakistan.
Sohail Ahmad, the then-chairman FBR, has recently been appointed Secretary Establishment Division.
Restoring the IMF programme
The provisional revenue collection figures provides a sigh of relief to economic managers who have been struggling to keep the budget deficit below six per cent of the total size of the economy.
“The collection would help restore the IMF programme as the government would now be able to restrict the budget deficit at 5.2 per cent (excluding 0.6 per cent of circular debt payments) along with curtailing expenditures”, he added.
Siddique said the collection would allow the policy makers to tell the world that Pakistan could achieve its targets.
The target was only achieved after Prime Minister Yousaf Raza Gilani provided an environment of “no political meddling in tax affairs,” he added.
The amnesty scheme also played a part in meeting the target, said Siddique.
The government had waived off all penalties and surcharges on late payment of taxes. The chairman announced to discontinue the amnesty scheme with immediate effect.
Broadening the base
The chairman said that efforts to broaden the tax base would continue and in the next fiscal year, the government plans on collecting Rs106 billion simply through broadening of the tax base.
This would help achieve the next year’s collection target of Rs1,952 billion, he added.
Regarding tax evaders, Siddique said that out of 71,000 prospective evaders, as many as 18,000 have filed their income tax returns.
Some of them have declared their source of income to be ‘income from abroad’ and that claim will now be probed, he added.
Published in The Express Tribune, July 1st, 2011.