As tax authorities fear a revenue shortfall of around Rs250 billion in December, they have suggested to the government to impose up to 3% additional customs duty on imports and announce a car amnesty scheme for the erstwhile Fata to raise Rs80 billion.
The proposals, however, could not win the backing of Finance Minister Ishaq Dar on Wednesday, who urged the Federal Board of Revenue (FBR) to try to achieve the unprecedented monthly target of Rs965 billion through enforcement measures.
In the remaining 10 days of the month, the FBR needs to collect a whopping Rs635 billion to achieve the goal, which is now impossible.
Dar chaired a meeting on the revenue performance at the FBR’s headquarters, according to a statement that was silent on the measures discussed in the huddle.
Sources said that the FBR wanted the government to offer a scheme to the residents of the erstwhile Federally Administered Tribal Areas (Fata) and the Provincially Administered Tribal Areas (Pata) for the regularisation of their unregistered vehicles. The proposal is meant to raise a minimum of Rs30 billion in taxes and duties.
These areas have been merged with the Khyber-Pakhtunkhwa province and are enjoying tax-free status till June next year. Authorities believe that the regularisation scheme will be needed to register at least 150,000 unregistered vehicles as of 2018.
According to another proposal, the government may slap 1% to 3% additional customs duty to generate Rs50 billion in taxes, according to sources. However, the finance ministry is inclined to impose the levy that will keep money out of the federal divisible pool. But no decision was taken.
These measures are being discussed as the FBR faces a mammoth task of collecting Rs965 billion in December. This target is even higher than the June 2023 target, which was set on the assumption that the FBR would receive around Rs260 billion in December on account of taxes that were levied in the budget.
However, some of these measures have been challenged in courts due to the constitutionality questions. Sources said that the FBR requested the finance minister to play his role in convincing the government-owned entities to pay 10% super tax.
The FBR expects that if the government companies pay the super tax, it can collect around Rs120 billion, which will bridge some of the monthly shortfall.
For the first half (July-December) of FY2022-23, the government has set a tax target of Rs3.65 trillion. As of Wednesday, the FBR had got Rs3.01 trillion, leaving it with a balance of Rs635 billion. It needs over 60% growth to achieve the monthly target. The annual target is Rs7.470 trillion, which is going to be missed without additional revenue-generating measures.
Sources said that the FBR wanted some of the shortfall to be bridged by increasing taxes on imports. The additional customs duty is other than the standard customs duty that is levied to receive more taxes. Recently, the IMF also asked Pakistan to impose new taxes of Rs600 billion to achieve the tax-to-GDP ratio of 9.5%. A possible shortfall may expose the government to more pressure from the IMF.
The Customs Department is facing a widening revenue shortfall due to contraction in imports while the Inland Revenue Service (IRS) has exceeded its July-November target, partially offsetting the low collection by the Customs.
The collection of customs duty, which was the cornerstone of FBR’s performance earlier, remained below target for the fifth consecutive month in November. The government has set customs duty collection target at Rs1.150 trillion, which according to the Customs Department may be missed by over Rs100 billion in the current fiscal year.
From July through December, imports amounted to $29 billion, but nearly $12 billion, or 41%, of imports were duty free. Now, the government is considering targeting these imports for revenue generation.
So far, the imports have contracted by 22% to $29 billion, which are hitting the revenue receipts. In the last fiscal year, the share of import taxes was around 52%, which during the first four months of current fiscal year came down to 45%.
According to the FBR’s statement, its Chairman Asim Ahmad gave a detailed presentation on the revenue targets and performance of the revenue board in November and December 2022.
He apprised the minister that the FBR had surpassed the revenue targets till November and expressed hope to successfully meet the targets in the remaining months of FY2022-23.
Published in The Express Tribune, December 22nd, 2022.
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