First quarter: FBR misses tax collection target by Rs22b

Annual revenue target of Rs2.81 trillion under jeopardy

ISLAMABAD:

In a first blow to the fiscal framework in the current fiscal year, the federal government has missed its first-quarter tax collection target by Rs20 billion, prompting experts to question its ability to achieve the annual target of Rs2.81 trillion.

According to provisional figures of the Federal Board of Revenue (FBR), it pooled Rs549 billion from July through September, falling short of the quarterly target of Rs569 billion.

Compared to the previous year’s tax revenues of Rs481 billion in the first quarter, the FBR managed to achieve 14% growth. However, it fell short of the required pace of 20% to hit the quarter’s target.

The annual revenue target of Rs2.81 trillion requires 24% growth over last fiscal year’s collection of Rs2.266 trillion.

The goal had been set under pressure from the International Monetary Fund (IMF), though FBR Chairman Tariq Bajwa suggested restricting the figure to Rs2.71 trillion.

The results of the first quarter also suggest that like previous years, the government may have to revise downward the annual target later.

The first major setback came despite imposition of additional taxes worth Rs231 billion in the budget. Most of the new taxes are indirect in nature, which are considered regressive.

The less-than-required growth in revenues could jeopardise the fiscal framework, making it difficult to achieve the budget deficit target of 4.9% of gross domestic product.

The government is already struggling to keep power subsidies in check after failure to implement a planned increase in tariffs. Already, the IMF has shown its scepticism over Pakistan’s ability to continue to undertake promised reforms.

While most of the criticism is directed at the FBR, officials of the tax collecting body blame the federal government for the failure. They stressed that the government’s policies have created safe havens, which leave little room for the FBR.

During budget preparations, Prime Minister Nawaz Sharif had personally shot down many tax proposals presented by the FBR, especially for the textile and real estate sectors, said the FBR officials. Rather, taxes on the two sectors were brought down significantly.

Last week, the government constituted the Tax Reforms Commission in a bid to review the tax policies. However, the composition of the body suggests that the government is not serious about restructuring the tax system.

According to tax experts, it will be difficult for the commission to introduce changes in the presence of those who are beneficiaries of the current system.

In September, the tax collection dipped, though the FBR had reached the targets in the first two months of the year. In July and August, Rs319 billion was collected with a 19% growth. However, the pace could not be maintained in September, when the target was missed by Rs22 billion.

Against the target of Rs252 billion for September, the FBR received Rs230 billion in taxes until Tuesday evening, said the officials.

Published in The Express Tribune, October 1^st, 2014.

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