Representational image. PHOTO: REUTERS
From July through September, the FBR provisionally collected Rs955 billion, which was 13.5% higher than the previous year but was far below the IMF target.
The missing of first-quarter revenue collection target by the Federal Board of Revenue (FBR) with a huge margin would force the Pakistan Tehreek-e-Insaf (PTI) government to either reduce development spending by the same amount or bring a mini-budget to remain on track of the $6-billion IMF programme.
In a first sign of putting more burden on people, Prime Minister Imran Khan on Monday decided to keep petroleum product prices unchanged despite recommendation of price reduction by the Oil and Gas Regulatory Authority.
The FBR also had to give one-month extension in the filing of annual income tax returns for tax year 2019 as the number of return filers remained around 446,000 till the last date of filing - September 30, 2019. In tax year 2018, nearly 2.6 million people and companies had filed annual tax returns.
The extremely low figure of 446,000 suggests that people were not coming forward in a big way to fulfill their statutory obligation.
The government also could not meet the IMF condition to refund Rs75 billion to the taxpayers and could issue only Rs30 billion worth of refunds by the end of first quarter (July-September).
The collection of Rs1.071 trillion in revenues and releasing Rs75 billion in tax refunds were part of the end-September conditions set by the IMF for the first review of the programme.
The provisional revenue collection results for July-September have once again affirmed that the annual Rs5.503-trillion IMF-dictated target is unrealistic, which has to be revised downwards.
In first quarter of the current fiscal year, the FBR could collect Rs955 billion in taxes against the downward revised target of Rs1.071 trillion, according to provisional official statistics. This has resulted in a revenue shortfall of Rs116 billion.
Overall, the collection in first three months of the current fiscal year was higher by Rs123 billion or 13.5% when compared with the collection of Rs832 billion in the same period of last fiscal year. Had the FBR cleared all the Rs75 billion in refunds, its collection would have dipped to Rs910 billion.
The FBR sustained a Rs48-billion hit in September alone when the tax machinery could provisionally collect Rs375 billion against the revised monthly target of Rs423 billion, said officials. Still, the monthly collection in September was up by 12% or Rs42 billion compared with the collection of Rs333 billion in September last year.
The government and the IMF have given an unrealistic target of Rs5.503 trillion to the FBR, which is not backed by required tax measures. A slowdown in economic activities has further complicated the matter for the FBR.
Prime Minister Imran Khan agreed to the towering annual target without first bringing administrative reforms in the FBR.
In the last fiscal year, the FBR had collected Rs3.829 trillion in taxes. The government took Rs735 billion worth of taxation measures in the current year’s budget while the nominal GDP growth is projected at 15% (3% real GDP plus 12% inflation), which would help collect additional taxes of Rs574 billion.
The growth in revenue collection in the first quarter was below the nominal GDP growth rate of 15%.
However, IMF Mission Chief to Pakistan Ernesto Rigo insisted during his visit that there had been a significant improvement in tax revenue collection, with taxes showing double-digit growth net of exporters’ refunds.
Reality vs claim
The FBR missed the first-quarter targets of income tax, sales tax, customs duty and federal excise duty despite slapping Rs735 billion worth of additional taxes and imposing 17% sales tax on local sales of five export-oriented sectors.
Against the quarterly target of Rs366.5 billion, the FBR provisionally collected Rs349 billion in income tax, missing the target by Rs17.5 billion or 4.8%. However, as compared to last year, there was an increase of Rs50 billion in income tax collection.
Sales tax collection stood at Rs405 billion against the target of Rs450 billion, falling short of the target by Rs45 billion or 10%. As compared to last year, the sales tax collection was higher by Rs70 billion or 21%.
Federal excise duty collection stood at Rs49.5 billion against the target of Rs60 billion, falling short of the target by Rs10.5 billion or 17.5%. But there was 17.8% or Rs7.5-billion increase in excise duty collection in first quarter of the current fiscal year.
Customs duty collection stood at Rs149.3 billion, below the quarterly target of Rs194.3 billion. The target was missed by Rs45 billion or 23%. The steep contraction in imports has adversely affected the customs duty collection.
As compared to last year, there was negative 4.3% growth in the customs duty collection.
Published in The Express Tribune, October 1st, 2019.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ