Govt policies hurt tax revenue: FBR

Finance minister directs taxmen to ramp up efforts to achieve revised revenue target

ISLAMABAD:

Finance Minister Shaukat Tarin on Wednesday directed taxmen to step up efforts to achieve the revised revenue target of over Rs6.1 trillion after they missed previous two months’ targets and projected losing more money due to the government’s policies.

Tarin held his first face-to-face meeting with chief commissioners of the Inland Revenue Service (IRS), who had been given upward revised individual targets in the light of an agreement with the International Monetary Fund (IMF).

Chief commissioners head field offices of the FBR that are responsible for tax collection.

Against the earlier target of Rs4.9 trillion for the IRS, the department has now been tasked to achieve the new target of Rs5.1 trillion. In addition to this, Pakistan Customs’ tax target has also been revised upwards to over Rs1 trillion against the original target of Rs917 billion.

However, Customs officials are not willing to accept the new target due to contraction in imports.

In a briefing on the Rs5.1 trillion IRS target, the FBR informed Tarin that there were two key challenges – slowdown in imports and reduction in sales tax on petroleum products, sources told The Express Tribune.

According to them, the FBR stated that the two developments could undermine the tax collection efforts on the part of IRS by around Rs250 billion and the major hit would come from the petroleum products.

Sources stated that the finance minister was told that some of the revenue losses due to these policy measures would be offset by the estimated revenue collection of Rs75 billion from the pharmaceutical sector.

The government has introduced a Rs360 billion mini-budget, including the imposition of 17% sales tax on the raw material of medicines. However, revenue estimates of Rs75 billion from medicines, prepared by the FBR’s Karachi office, appeared to be on the higher side, the sources added.

The government has promised to release tax refunds for the pharmaceutical sector within 72 hours.

Import contraction and almost zero sales tax on petroleum products may slash the revenue by Rs275 billion to Rs300 billion, said Tarin while talking to The Express Tribune.

The minister was hopeful that the tax target of Rs6.1 trillion would be achieved and cited that he had asked the IRS to collect about Rs5.2 trillion.

Tarin said that the FBR’s target had now been revised and he directed the IRS officers to recover the stuck revenue in cases related to the telecom and banking sectors.

“Overall revenue of about Rs3 trillion is stuck in litigation and I have also directed the FBR to use the Alternative Dispute Resolution Committees (ADRCs) to expedite the resolution of the matter,” he said.

Under a deal with the IMF, the current target of Rs5.829 trillion will go up to Rs6.129 trillion, which will also bring changes to the monthly targets.

Tarin visited the FBR headquarters days after the tax department missed its monthly target for the consecutive second month.

Overall, the FBR exceeded its seven-month tax collection target by Rs262 billion but it missed the monthly goal for December and January, raising concerns about its ability to achieve the revised target.

The FBR missed the January tax target by Rs27 billion. Against the target of Rs457 billion, the tax authorities provisionally collected Rs430 billion in January.

Last month, the FBR missed the targets of sales tax, federal excise duty and customs duty. But the income tax collection target was surpassed by Rs15 billion.

The finance minister was informed that if the current trend of slowdown in imports continued, there could be a significant shortfall in the tax revenues. This will mainly hurt the collection of field offices that heavily rely on import-related taxes.

However, some of those losses would be compensated due to the mini-budget, the minister was informed.

“We do not have any option but to achieve the target, although the Rs6.129 trillion figure appears to be difficult in the changing circumstances,” a senior FBR official said on condition of anonymity.

According to the sources, Tarin told the chief commissioners that they get increments in salaries based on their performance. He is also expected to meet Customs officials next week to review their performance.

Customs authorities collected Rs548 billion in taxes in seven months, higher by Rs152 billion, or 38%. It was Rs55 billion more than the target.

However, Customs too missed its monthly target for the first time after imports reduced by $1.7 billion in January.

Published in The Express Tribune, February 10^th, 2022.

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