ISLAMABAD: At least Rs10 billion worth of discrepancy has been found between figures reported by the Federal Board of Revenue (FBR) and cash deposited in the treasury, underscoring the need for immediately resolving reconciliation issues that can undermine credibility of official figures.
The discrepancy highlights the urgency to establish an online interface between the FBR and the State Bank of Pakistan (SBP), which has also been recommended by the World Bank in its latest report on Pakistan's financial system.
Against the FBR's claim of collecting Rs280.5 billion in revenues in July, the cash deposited in the treasury stood at around Rs270 billion, according to sources in the Ministry of Finance and the SBP. But the FBR's own data, maintained by the Directorate of Research and Statistics, showed the provisional revenue collection at Rs256.2 billion in July.
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The three collection figures show discrepancy in the range of Rs10 billion to Rs24 billion. This means July's revenue collection was either Rs256.2 billion or Rs270 billion. Sources said the collection would end up at Rs270 billion since the SBP's data was more reliable.
After the discrepancy is sorted out, the shortfall in tax collection against a modest target of Rs291.5 billion will range from Rs22 billion to Rs35 billion.
Even the Rs270-billion collection would be higher by only Rs19 billion or 7.5% over last July's collection - a pace that is far lower than the nominal expansion in the size of economy.
The entire discrepancy was on account of the income tax collection figures reported by the FBR and the cash deposited under this head in the treasury, the sources said. This has raised suspicion that the FBR tried to take advance income tax on July 31 - last day of the month, but companies did not deposit cash in the kitty on the same day, they added.
The FBR claimed Rs99.4 billion worth of income tax collection but the data processing centre verified only Rs74.8-billion collection under this head, showing a gap of Rs24.5 billion. There might be truth to the suspicion of taking advances as actual income tax payments till July 30 were Rs64 billion, according to the sources.
The sources said nearly Rs14 billion worth of challans were issued by banks but the cash was deposited the next day.
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When contacted, FBR's spokesman Dr Hamid Atiq Sarwar said as per FBR's dashboard collection figures, the collection in July stood at Rs280.4 billion.
To a question, the FBR spokesman said spill over of a certain amount between July and August was more of an accounting issue, which would not affect the overall collection in the current fiscal year.
In its Public Expenditure Financial Accountability (PEFA) assessment 2019, the World Bank recommended an online interface between the FBR, SBP, National Bank and Accountant General Pakistan Revenue to address the reconciliation issues. "There is no evidence of complete reconciliation of tax assessments, collections, arrears and transfer to treasury," according to the report's findings.
FBR's information technology system also warrants an upgrade. The World Bank has allocated $80 million for the information technology system under the $400-million tax reform project.
SBP spokesman Abid Qamar did not reply to a question on the provisional revenue collection in July.
The International Monetary Fund (IMF) has given Rs5.503-trillion annual tax collection target to the FBR. The tax machinery requires 45% growth to achieve the target as it closed the last fiscal year with collection of Rs3.820 trillion. In its history, the FBR has achieved maximum annual growth of 21% in any fiscal year.
The government has imposed a record Rs733.4 billion in additional taxes in the budget in an endeavour to collect Rs5.5 trillion in FY20.
The FBR missed the first month revenue collection target despite paying less refunds as compared to the same month of previous fiscal year. As against refunds of Rs11.8 billion in July 2018, the FBR released Rs8.5 billion last month, a negative growth of 28%.
Blockage of genuine refunds is one of the issues that has been criticised by the industrialists and exporters and was also a reason for resisting the imposition of 17% sales tax at the manufacturing stage of five major export-oriented sectors.
Published in The Express Tribune, August 3rd, 2019.
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