FBR achieves five-month tax target

Achievement seen due to better performance of Pakistan Customs

ISLAMABAD:

Less than 1.1 million people have so far submitted annual income tax returns with only a week left in the expiry of extended deadline, which leaves the Federal Board of Revenue (FBR) with a gigantic task to bring 1.9 million people to the tax net just to match its previous performance.

However, the revenue machinery achieved its five-month target, which was set at a low level, and closed November with total tax collection of Rs1.686 trillion.

For the July-November period of current fiscal year, the government had set the target at Rs1.67 trillion for the FBR, which was equal to 33.7% of the annual target and considered very low.

Yet again, the FBR has shied off the monthly target for the fourth successive month and the five-month target was achieved - this time due to better performance of Pakistan Customs.

The provisional figures came the day Special Assistant to Prime Minister on Revenue Dr Waqar Masood Khan reportedly said that the Rs4.963 trillion annual tax collection target had to be revisited.

Khan has now launched a campaign to broaden the base but the FBR’s field formations have to double up efforts to show progress by getting more people to file tax returns.

Khan said that the FBR had credible data of 7.4 million people whose withholding taxes were deducted but they did not file income tax returns.

The campaign has not yet translated into increasing the number of filers. The campaign had been launched in the hope that these people would file their annual returns by December 8 - the extended deadline.

The statutory date for filing the annual returns is September 30, which the FBR has extended till December 8 with an announcement that it will not give any further extension.

About 1.07 million individuals and firms have so far submitted annual income tax returns against 1.7 million in the same period of last year, showing a 36% decline, according to sources in the FBR.

They said that for tax year 2019, over 2.94 million individuals and companies had submitted tax returns. “This means that in the remaining one week, the FBR needs at least 1.9 million more income tax returns just to match the figure of last tax year,” said a senior FBR official.

The FBR must receive 235,000 per day additional income tax returns to match the previous figure. The annual tax return is a statement of expenditure, income and subsequent tax liabilities of an individual and a firm.

Sources said that the FBR now had two choices, either to give further extension with a minor penalty or launch aggressive enforcement operations against those who still remained outside the tax net. The chances of launching an immediate enforcement campaign remained low, said the sources.

Despite declaring low tax collection as a matter of national security, Prime Minister Imran Khan has not been able to appoint a permanent FBR chairman and is running the organisation on an ad hoc basis.

Collection

As against the July-November target of Rs1.67 trillion, the FBR provisionally collected nearly Rs1.69 trillion, according to FBR officials.

The collection was also higher by Rs69 billion or 4.2% when compared with Rs1.62 trillion collected in the same period of last fiscal year.

The five-month cumulative growth in revenue collection was hardly 4.2%, which was almost half of the prevailing inflation rate in the country.

The 4.2% growth rate is not sufficient to achieve the annual tax collection target of Rs4.963 trillion, which needs a pace of over 22%. The International Monetary Fund (IMF) has projected collection shortfall of over Rs300 billion and is asking Pakistan to introduce a mini-budget.

The tax-wise collection details showed that the collection was more skewed towards indirect taxes. The share of income tax in total tax collection further shrank to 35% and the government was burdening the economy and people with more indirect taxes.

The Inland Revenue Service missed its monthly collection target but Pakistan Customs surpassed the target set for November.

The growth in sales tax collection also remained almost flat in November while overall there was around 6% increase in GST collection during the first five months of the fiscal year, said the sources.

Pakistan Customs has collected Rs57 billion under the head of customs duty in the month of November of this fiscal year and exceeded the monthly target of Rs49.1 billion, which is 16% more than assigned customs duty target.

Overall, Pakistan Customs has collected Rs263 billion during the first five months of the current financial year against the target of Rs231 billion assigned for first five months of this financial year; which is 14% more than the assigned target.

All these milestones were achieved despite the fact that import economy was facing a second wave of the Covid-19 pandemic, according to Pakistan Customs officials. The multiple relief packages in the form of exemption and reduction from customs duty, regulatory duty and additional customs duty were also introduced during the current financial year to provide support and relief to business community but Pakistan Customs has still successfully achieved the assigned targets owing to efforts of the operational staff and effective control measures, they added.

Published in The Express Tribune, December 1^st, 2020.

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