Govt claims bullseye on tax collection target

Published: July 1, 2011
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Meeting the target may help restore the suspended IMF bailout programme.

Meeting the target may help restore the suspended IMF bailout programme.

ISLAMABAD: 

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.

Amnesty scheme

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.

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Reader Comments (13)

  • Incredible
    Jul 1, 2011 - 8:09AM

    With all the bashing of the USA and the path being taken by the Army, I see little chance of $11.3 billion coming to Pakistan. USA and Western world will try to find faults and delay this bailoutRecommend

  • Ali Turk
    Jul 1, 2011 - 8:28AM

    What I understand is the major portion of this tax collection was done by Large Tax payers Unit Karachi which contributed over 45% of total taxes collected in Pakistan and exceeded their tax collection targets.

    There was a change in leadership at Large Tax payers Unit in Karachi in last four months and it has become a dynamic institution where merit is the only criteria for tax assessments.All officers and staff start working by 9:15 AM at most. I have gone there few times for work and it is a model of government department efficiency.

    Other units of FBR should learn from Large Taxpayer Unit Karachi and replicate their model of efficiency. May be this way Pakistan will start a journey towards self reliance.Recommend

  • Mirza
    Jul 1, 2011 - 9:11AM

    Given the chance Pakistani people would get it done! Congratulations for achieving the target. If given a chance the nascent democracy can finally pull Pakistan out of this economic mess. I know all is not well, but it is a big step in the right direction. Recommend

  • Tooba karo
    Jul 1, 2011 - 9:59AM

    Tax collections may have increased, most likely due to coercive or inappropriate orders with no standing

    However this is effectively taxing many industries out of business and the Fbr. With slowing economy and little room to increase prices to have decent returns, spurious interpretations of tax laws leading to great advance tax and more time in courts is going to drive more and more business underground or worse, many large multinationals who don’t confirm to the brown paper bag method of tax management in pakistan are now finalizing exititng pakistAn.

    People don’t do business to generate tax revenue as the only outcome. The do it to earn money but with gov taxes now eating away more than 50-60 percent of profits u will see more exits from pakistan of major global companies meaning less future tax base (as more business in smaller private hands will mean more tax paid as bribes rather than ending up in the exchequer) and this in turn will mean even less chances of IMF help and less economic development

    The Fbr is not targeting tax and business fundamentals but simply getting cash from fewer and fewer people which the super rich politicians pay nothing at all. Recommend

  • shah jee
    Jul 1, 2011 - 12:58PM

    @ Ali Turk: LTU Karachi also has the highest incidence of tax evasion under their watch…Recommend

  • Anserali Khan
    Jul 1, 2011 - 1:21PM

    Let us give credit where it is due. Even in these difficult times FBR was able to achieve the tax collection targets and once again Karachi contributed over 50% of the total taxes.

    Good job FBR and FBR team in KarachiRecommend

  • Ahmad Ali Khan
    Jul 1, 2011 - 1:29PM

    I have been to Large Tax Payer Unit Karachi two times last month for our company’s case and I have been very impressed by their professional approach and knowledge of tax law. Within 10 days of final hearing and examination of record, the assessment order was served through TCS courier service at our office address.Other government units should learn from Large Tax Payer Unit Karachi for professionalism and efficiency.Recommend

  • Kafka
    Jul 1, 2011 - 2:32PM

    I wonder how much of the collected taxes go into Health, Education and development……….Recommend

  • Hedgefunder
    Jul 1, 2011 - 3:57PM

    @Kafka:
    Come now, old chap! firstly this is a minor miracle that they have hit the target, if that is true, as in today’s Pakistan everything that comes out from this Govt or the Army has to be taken with pinch of salt!! There is a truth Deficit!! This could just be a ploy to once again fool the IMF, as they are meeting again in July, and Pak desperately needs that LOC, to draw down further borrowings to adjust its deficit!!!
    In regards to your question, about expenditure on Health, Education etc…..
    Well, what will the Brave Army do, if they prioritise these funds for such mundane and unnecessary luxuries for the people???
    How will the brave Army and Govt survive without these funds, to service their operations and manage the Nation for its People?
    As now its foregone conclusion that US Aid will come to abrupt halt..Recommend

  • Meekal Ahmed
    Jul 1, 2011 - 4:33PM

    Most people know how these figures are arrived at, especially at year-end. The FBR Chairman says there will be an audit. I wish he would stop insulting our intelligence.

    At 9.3% of GDP, this is nothing to be gleeful about. This is an on-going debacle.

    This will NOT unlock IMF financing. The IMF is more interested in the structure of the tax regime and not some cooked-up numbers. In any case, the IMF and the GOP will now sit down and calculate the ‘base’ on which next years tax collection target will be built. In other words, all “special factors” such as advanced tax will be removed. Recommend

  • Hedgefunder
    Jul 1, 2011 - 5:50PM

    @Meekal Ahmed:
    Sir, it is always a pleasure to read your comments as they do contain core and substance.
    I was thinking along the same line that, this is another cosmetic accounting being done for the benefit of IMF, however as you so rightly pointed out there are other factors to be taken in account too, which i had not considered.
    Thank you.Recommend

  • sam
    Jul 2, 2011 - 1:19PM

    question.. how was this target met when the target for tax collection from tax evaders was missed by 93%?????Recommend

  • Someone v.2
    Jul 2, 2011 - 11:34PM

    @Hedgfuner

    Go away and get a life. There are plenty of Indians on Pakistani news websites that love to bring negativity in every single little thing, your service isn’t required.

    On the other hand, this is definitely a step in the right direction. Hopefully we can keep going on this path. Recommend

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