The government has managed to increase tax collection in October but fell Rs7 billion short of the target amid excessive reliance on indirect taxes.
The Federal Board of Revenue bagged Rs126 billion in October against the target of Rs133 billion, said a senior member of the board while quoting provisional figures. He, however, said that there are expectations that the figure might go up by a couple of billion rupees as book adjustments have not been taken into account.
Of the total taxes, the tax machinery generated Rs37 billion in direct taxes, which is only 29 per cent of the total collection and showed heavy reliance on indirect taxes. Moreover, income tax collection was only 9% more than the same month last year as the authorities generated Rs34.2 billion.
Tax experts, both official and independent, agree that indirect taxation has regressive implications for the economy.
On account of sales tax, the FBR collection increased 35% or 16.2 billion to Rs63 billion in October. Excise duties bagged Rs13 billion, approximately Rs3 billion or 30 per cent more than last year’s figure.
The customs duties collection remained in the same range at Rs13 billion during the period under review.
Overall collection in October was 22 per cent more than last years’ collection. The FBR requires over 25 per cent growth this year to achieve the over ambitious tax collection target of Rs1,952 billion.
Impact of administrative reforms invisible
The impact of administrative reforms in the FBR remains invisible despite lapse of four months of the current fiscal year. Last month, the FBR Chairman Salman Siddique told the Senate Standing Committee on Finance that the authorities have carved out a plan to recover Rs50 billion through administrative measures. He mentioned that Rs20 billion would be recovered against illegal sales tax adjustments while Rs15 billion would be recovered through audit of withholding tax agents. Furthermore, Rs15 billion will be bagged by recovering tax arrears.
FBR’s cumulative collection improved Rs102 billion or 25.7 per cent to Rs499 billion during July to October 2011 on a yearly basis. The figures show that authorities have collected Rs159 billion on account of income tax which was less than one-third of the total collection. Under the head of income tax, almost 60 per cent collection is historically on account of withholding taxes that are also considered indirect taxes but the FBR counts them as part of direct taxes.
The FBR bagged Rs244 billion in the form of sales tax in four months, almost half of the total collection.
Published in The Express Tribune, November 2nd, 2011.
COMMENTS (2)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
1714129906-0/Clint-Eastwood-(1)1714129906-0-270x192.webp)
Because people cannot avoid indirect taxes. It's not that difficult to avoid direct taxes, sadly, unless you work on a salary.
HOW is it that FBR is able to increase indirect tax collection by a large margin but not able increase income tax collection??