Achieved: Province meets tax collection target of Rs42b

Experts warn 25% increase may prove to be negligible .

KARACHI:

The Sindh Revenue Board (SRB) will meet its sales tax collection target of Rs42 billion for the outgoing fiscal year, up 25% from previous year’s collection of Rs33.6 billion, according to budget documents 2014-15 revealed on Friday.

Economists have lauded the expected growth in provincial revenue but they pointed out that this is a minimal amount compared to the size of the provincial budget.

“The increase in tax collection through SRB is a welcome sign, but we should not oversee the fact the Sindh has the potential of generating up to Rs100 billion,” said Kaiser Bengali, a renowned left-leaning economist.

With rising revenues, the Sindh government should also realise that its responsibility to spend this money properly and diligently is also increasing, Bengali added.

MD Emerging Economics Research Muzammil Aslam said, “It is good to see Sindh is increasing its revenue collection by 25%, but it is still very small when you see the total size of the provincial budget.”

Sindh government has set the tax collection target at Rs49 billion for the next fiscal year, which is too little compared to the total budget size of Rs686 billion for fiscal 2015. This means that the provincial government is highly dependent upon the federal government or other sources of income, he added.

Reduction in sales tax

While presenting the budget 2015, Sindh Chief Minister Qaim Ali Shah on Friday announced that the province is proposing to reduce the sales tax rate on services from the current 16% to 15%.

“This reduction in sales tax rate will provide substantial relief to our taxpayers and citizens and we expect reciprocal cooperation from the taxpayers for better compliance,” he stated.

Sales tax on new sectors

The Sindh government has proposed to introduced 5% concessionary sales tax on services on three new sectors namely education, health services and road transport services.

Shah said that the provincial government is introducing these taxes, as these particular sectors were not paying sales tax on services.

“Several taxpaying sectors complain of the discriminatory tax treatment on the ground that they pay Sindh sales tax but these three sectors were not taxable,” he said.

Experts welcomed the levy of sales tax on these three sectors especially at the concessionary rate of 5%.

“The introduction of 5% concessionary sales tax on education is a welcome move but its introduction on health services is a little unfair for the people,” said Bengali.

Muzammil Aslam also voiced in favour of levying 5% sales tax on these three sectors.

“I am in favour of the introduction of 5% sales tax on the services of these three sectors. But I think it will be a challenge for the Sindh government to collect tax especially from undocumented hospitals,” said Aslam.

Published in The Express Tribune, June 14^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.