Way behind: Rs1.29 trillion is the tax collection in about nine months compared to full-year target of Rs2.381 trillion. DESIGN: ANAM HALEEM
As criticism mounts over inability of the Federal Board of Revenue (FBR) to meet targets, tax authorities have defended their performance and instead held the finance ministry responsible for making inaccurate assumptions at the time of presentation of budget.
FBR Chairman Ali Arshad Hakeem faced embarrassment on Tuesday when the finance ministry told Prime Minister Mir Hazar Khan Khoso that the FBR had miserably failed to achieve the revenue collection target for the current fiscal year.
According to FBR’s documents, in the first 26 days of March, it collected Rs128.5 billion compared to Rs98.3 billion in the same period of last year, a 30.8% increase which the tax authorities have described as impressive and much higher than inflation unadjusted gross domestic product (GDP) growth rate.
Of the total, the collection of direct taxes rose 60.2% at Rs50.7 billion against Rs31.6 billion in March last year.
In indirect taxes, Rs55.7 billion was received as sales tax compared to Rs48.5 billion received last year, a growth of 15%. Federal excise duty collection increased 16.9% at Rs8.2 billion compared to Rs6.9 billion in March last year. Growth in customs duties was 24.6% as the FBR bagged Rs14 billion against Rs11.2 billion last year.
“The exceptional increase in revenues in March is a seasonal phenomenon as at the close of each quarter tax collection jumps because of advance payments,” said Dr Ashfaque Hasan Khan, Dean of Business School of National University of Science and Technology.
Unlike the high growth in March, tax collection in nine months (July-March) stood at Rs1.29 trillion, up Rs81.8 billion or 6.8% over the corresponding period of last fiscal year, according to the FBR documents. This is far short of the growth rate of 26% that the FBR needs to meet the annual tax collection target of Rs2.381 trillion.
Reasons for shortfall
The FBR was of the view that the finance ministry had set this year’s tax target on unrealistic foundations and the board would defend its position in front of the prime minister.
The ministry had expected the nominal GDP to remain around 16%. Contrary to this, the nominal GDP has so far been around 12% as both inflation and GDP growth targets have been revised downward.
The FBR’s performance too has been marred by political appointments on key posts. According to officials, people with tainted past have been brought to important positions under political considerations and the FBR chairman has little option to make appointments.
Another big hurdle that stands in the way of boosting revenues is the tax break given to influential lobbies by the previous government, the officials said.
The FBR has withdrawn various tax measures announced on the eve of federal budget like 1% tax on all types of manufacturing. Apart from this, tax relief has been given to sugar and steel industries, allegedly under political compulsion.
Published in The Express Tribune, March 28th, 2013.
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With 12 hour load sheding income tax collection will almost fell by 40percent this year due to lower sales and capacity production.this is simple
The way FBR was going, this massive tax shortfall was expected
Nothing un-expected. FBR has serious problems of leadership and directions
for example ..FBR at one stage in October 2012 was estimating that they will collect Rs 30 billion in duties from non-duty paid cars which were about 2,00,000. FBR announced Amnesty scheme for these cars, and now FBR are expected to collect Rs 3 Billion.( and the Amnesty scheme will be extended in all probability)
Nation has lost Rs 30 Billion in legitimate duty.Who is responsible for this huge loss
Please ask FBR How did these Left hand drive cars enter Pakistan when in Afghanistan it is Right hand drive?.
FBR has been run down over past 9 months and has become dysfunctional and unless major changes in the team at top are made, FBR may become beyond repair.
The target set for FBR in budget for the year was Rs 2319 Billion and in nine months only Rs 1290 billion have been collected.Even these numbers are suspect as FBR has since past 3 months stopped issuing refunds of Sales Tax of genuine tax payers and according to one estimate over Rs 100 billion of Sales Tax Refunds stand unpaid by FBR.
FBR has wasted past 6 months in playing with numbers without any substantial efforts either to increase the tax base or to collect due tax.
Flurry of un-thought SROs in last 8 weeks slowed down exports and business and according to one estimate caused loss of over Rs 25 billion.
The nation has been badly let down.by FBR and new team needs to be put in place.OR keep on suffering with slipped targets of tax collection
Beneficiaries of SROs shout and tax evaders shout"change"! Yet no one wants to put their money where their mouth is.