Government collects Rs1.31t in taxes

ISLAMABAD: The government has collected Rs1.31 trillion in taxes in fiscal year 2010, falling short of the Rs1.38 trillion target mainly because of fixing unrealistic targets. The target was missed by Rs67 billion.

“Authorities collected over 60 per cent of taxes through regressive measures,” said an official of the Federal Board of Revenue (FBR) while talking to The Express Tribune on Friday.

Provisional statistics showed that FBR generated Rs791 billion through indirect taxes. The official said that the government collected Rs511 billion on account of sales tax compared to the revised target of Rs540 billion.

Independent experts said that the government deliberately overstates the revenues and understates expenditures in order to show the budget deficit on the lower side.

The collection on account of customs duty was Rs161 billion against the target of Rs165 billion. The FBR netted Rs119 billion in federal excise duty against the target of Rs134.4 billion.

Collection of direct taxes stood at Rs522 billion against the target of Rs540 billion, which is 3.4 per cent less than the target.

In June, the FBR bagged Rs180 billion in taxes against the target of Rs191 billion.

The Rs67 billion shortfall will result in a budget deficit of over 0.5 per cent of Gross Domestic Product, taking the overall deficit to above 5.5 per cent. The revised budget deficit target, which was agreed with the International Monetary Fund, was 5.1 per cent.

Earlier, the government had increased the target by 0.2 per cent from 4.9 per cent due to less-than-expected inflows from the Friends of Democratic Pakistan forum and higher security expenditures.

“Tax authorities could not achieve the target because of failure to improve administration, cut in public sector spending and 50 per cent tax relief on sugar,” said FBR Chairman Sohail Ahmad recently.

Ahmad said the FBR had targeted to save Rs50 billion in taxes by improving tax administration but that could not be done. Besides, over Rs200 billion cut in the Public Sector Development Programme resulted in a shortfall of Rs15 billion in targeted tax collection.

“A 50 per cent reduction in sales tax on sale of sugar caused a loss of Rs22 billion and the relief package to businessmen and traders of Khyber-Pakhtunkhwa will cost the kitty Rs5 billion,” he added.

Experts are also sceptical about the new fiscal year’s estimates for revenues and expenditures. For fiscal 2011, the government has given tax collection target of Rs1.67 trillion to the FBR, which according to experts is again unrealistic keeping in view the current economic conditions.

The Revenue Advisory Council (RAC), a body of independent experts working in collaboration with FBR, has estimated that this year tax collection would not exceed Rs1.65 trillion.

Published in The Express Tribune, July 3^rd, 2010.