Target reduced by Rs63b

ISLAMABAD: The tax collection target for fiscal 2010-11 has been reduced to Rs1,604 billion by the Federal Board of Revenue (FBR).

The revenue target had originally been set at Rs1,667 billion. According to a senior official of the FBR, the revised targets will be presented before the International Monetary Fund (IMF) during the upcoming meeting between the IMF and a Pakistani delegation. The meeting is scheduled to be held on August 23 in Washington.

Expecting a detailed discussion with the international lending agency, the official said that methods of tax collection will also be evaluated during the discussions. The original target of Rs1,667 billion had already been declared unattainable by the IMF. Pakistan was also advised to revise the target to a more achievable one.

In order to decrease the overall collection target by Rs63 billion, the direct tax collection target has been slashed by Rs12.7 billion to Rs645 billion. The sales tax collection target has been reduced by Rs9.9 billion to Rs665 billion. Meanwhile, the targeted federal excise duty collection has been lessened by Rs29 billion to Rs124 billion and customs duty collection target has been cut down by Rs10.8 billion to Rs170 billion, it has been learnt.

Furthermore, the official disclosed that the possibility of a further revision in the revenue targets remained open depending on a more accurate assessment of damages inflicted by the floods.

According to initial estimates, the growth in Gross Domestic Product (GDP) is expected to be around 3.9 per cent as opposed to optimistic goal of 4.5 per cent. Similarly, other economic indicators are expected to be affected adversely as well.

If the GDP growth rate does fall to 3.9 per cent, the official estimated a further decline in tax collection up to Rs50 billion. A one per cent fall in GDP growth leads to an estimated fall in collection of between Rs120 and Rs130 billion, he explained.

However, he warned that if the fall in GDP growth is worse than expected, then a drop in tax collection would follow suit.

Published in The Express Tribune, August 19th, 2010.