The federal government plans to introduce a mini-budget to achieve this year’s downward revised target of Rs2.345 trillion in revenue, after tax collection grew just 15% in first ten months of the current financial year despite holding refunds of taxpayers.
The proposal is under consideration of Federal Board of Revenue (FBR) and a final decision on whether to withdraw certain Statutory Regulatory Orders (SROs) before June 30 will be taken during ongoing discussions between Pakistan and International Monetary Fund (IMF), FBR sources revealed.
The actual need will be determined during the policy level dialogue, which begins today (Tuesday) in Dubai.
With existing measures, the revenue collecting body cannot achieve the downward revised tax target of Rs2.345 trillion and the loud thinking was that the government will have to advance the calendar of withdrawing tax exemption to achieve the goal, according to another FBR official.
One option could be that the SROs – the legal instruments used to enact changes in tax laws – that the federal government wanted to withdraw from July this year, may be withdrawn from this month, the sources said.
The other option, which has often been practised in the past, is that the tax measures announced in the budget, will take effect from the day of announcement, which could be June 6, the sources added.
If the government implements tax measures from day of budget announcement instead of July 1st, this will also be treated as mini-budget, according to tax experts.
Commenting on the prospects of a mini-budget, an office-bearer of Federation of Pakistan Chamber of Commerce and Industry said that it will erode the confidence of the business community.
During first ten months of the fiscal year, the FBR collected only Rs1.743 trillion in taxes, showing a growth rate of 15% against the required rate of 28%, which was needed to achieve the original target of Rs2.475 trillion. Due to continuous dismal growth rate, the government has already lowered the target by Rs130 billion.
During the corresponding May-June period in 2012-2013, the FBR had pooled Rs440 billion. Thus to achieve the Rs2.345 trillion target, FBR requires a growth rate of 38% in the next two months.
The sources said that the FBR cannot collect Rs602 billion in the remaining two months, either the government will have to adjust the target further downward or accept its demand to advance the calendar to withdraw the SROs.
Published in The Express Tribune, May 6th, 2014.
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