Tax collection: FBR to take extra measures to cover last year’s shortfall

Plugging of revenue leakages and recovery of arrears to generate Rs50 billion.

ISLAMABAD:

The government may raise additional taxes to cover up past mismanagement as the top finance ministry official said on Wednesday the government would take additional measures to offset the impact of Rs30 billion less revenue collection last year.

Finance Secretary Dr Waqar Masood told the Senate Standing Committee on Finance and Revenue that owing to the shortfall in tax collection last year, the base for this year’s revenue target of Rs1,952 billion had been affected.

He, however, did not elaborate when the government would take these measures and the actual amount it wants to raise. According to various estimates, the government may collect Rs1,830 billion to Rs1,870 billion, a gap of Rs82 billion to Rs122 billion. The authorities do not want to bridge the gap through taxes and have a plan to recover a significant amount through administrative measures, primarily focusing on plugging revenue leakages and recovery of arrears.

Federal Board of Revenue Chairman Salman Siddique told the committee that the authorities have carved out a plan to recover Rs50 billion through administrative measures. He said Rs20 billion would be recovered against illegal sales tax adjustments while Rs15 billion would be collected through audit of withholding tax agents. Furthermore, Rs15 billion will come in the form of tax arrears.

He said last year the government had targeted to collect Rs20 billion through flood surcharge but the corporate sector refused to pay. The Sindh High Court has given a judgment in favour of FBR, which is expected to collect Rs21.5 billion from the corporate class on account of last year’s flood surcharge. The salaried class has paid its share of Rs8.8 billion flood surcharge.

Siddique admitted that the FBR could not tax textile, leather, sports and surgical sectors according to their potential. Against the target of Rs7.5 billion, the FBR could collect only Rs600 million from March to June last year. He said the government has successfully negotiated with the industry and a new statutory regulatory order will be issued soon to remove the lacunas.

The committee exonerated the FBR chairman from allegations of fudging revenue figures last year after he said that data of field formations, particularly the Large Taxpayer Units of Karachi and Lahore which reported inflated figures of Rs21.5 billion and Rs9.5 billion respectively, became the basis for claim that Rs1,590 billion tax collection target had been met. To fix responsibility, Siddique said, the government has reverted back chief commissioners to the position of commissioner and the central selection board has delayed their promotions.

Sales tax refunds

The FBR briefed the committee that 46,942 tax refund cases involving an amount of Rs55.2 billion were pending with the board.

The committee asked the FBR to settle up to Rs1 million refund claims in 45 days which would lower the overall pendency by almost 90 per cent.

“It is alarming that the FBR is sitting on Rs55 billion claims,” said Senator Ahmed Ali of MQM, the Chairman of standing committee.

According to FBR presentation, it has withheld Rs12.8 billion refund claims for the last four years. Sales tax claims worth Rs8.7 billion were due for the last three to four years while Rs9.3 billion has been due since 2009.

Published in The Express Tribune, October 13^th, 2011.