K-PRA collects Rs10.58b in FY 2018-19

Authority says it is struggling to enrich tax culture, widen tax coverage in the province

PESHAWAR: Despite losing out on some Rs2.83 billion in revenues from telecom companies owing to an order from the apex court, the provincial revenue authority on Monday said that it had still managed to raise Rs10.584 billion in the outgoing fiscal year 2018-19.

This, however, was down from the Rs10.91 billion collected the previous year and far short of the Rs15 billion tax revenue set by the provincial government at the beginning of the fiscal year.

The figures were disclosed by the Khyber-Pakhtunkhwa Revenue Authority (K-PRA) on Monday.

“The financial year 2018-19 however, posed many challenges,” the authority explained, adding that the Supreme Court had suspended the collection of sales tax imposed on cellular telecom services.

Despite the ‘unanticipated’ hit, the authority said it still managed to collect funds close to what it had collected the previous year with the telecom revenues.

This revenue collection, the authority said, would not have been possible without the reforms and strong accountability apparatus introduced by the provincial finance department.

The K-PRA said that during the fiscal year, they moved strategically with better enforcement and declaration-specific internal audit efforts to mine additional revenue from non-telecom sectors.

These efforts, K-PRA said, helped bring about a 43 per cent growth in tax collection from non-telecom regimes.

The authority further explained in the Rs10.91 billion collected in the fiscal year 2017-18, the telecom sector contributed around 48 per cent or Rs5.287 billion of the aggregate collection. Owing to the SC bar, this figure fell to just 23 per cent or Rs2.453 billion in the fiscal year 2018-19.

Similarly, in the fiscal year 2017-18, non-telecom sectors contributed 52 per cent of the overall collection. But in the fiscal year 2018-19, it had jumped to 77 per cent.

Receipts from the withholding tax regime rose to Rs1.538 billion in FY 2018-19, as opposed to Rs1.12 billion collected in the last fiscal year, showing a historical increase of 38 per cent or Rs424.27 million.

Services from the oil and gas sector contributed Rs1.438 billion, while all other services yielded Rs5.15 billion.

The authority said that for the incoming fiscal year 2019-20, they have adopted drastic measures to revamp their tax schedule and rationalise tax rates.

Instead of taxing individual services, tax coverage has been linked to 46 classes of services. Further, telecom services are chargeable to tax at a rate of 19.5 per cent while the standard rate of tax for all non-telecom services has been set at 15 per cent.

The tax rate on 13 services has been reduced from the standard 15 per cent to four different reduced tax slabs ranging from two per cent at the lowest end to 10 per cent at the higher end — resulting in a net reduction of tax.

Some of the sub-classes of eight services have been given tax relief by applying multiple tax rates. Such policy, the authority hopes, will not only promote tax compliance and economic documentation but will also attract new investments in the province creating new employment opportunities and raising the average standard of living.

To further increase collection, the K-PRA said that it will be opening new satellite offices in major urban areas of the province, expanding its physical outreach and increasing the overall tax base through taxpayers’ education and facilitation. Necessary human and other resources are being mobilised for this purpose.

“With the accelerated physical expansion coupled with well-planned rigorous enforcement and audit measures, K-PRA will ensure further higher growth in tax collections from non-telecom services,” it said.

Published in The Express Tribune, July 2^nd, 2019.