Revenue collection: Toying with numbers again, FBR shows higher growth

Tax collection for November 2013 lowered by Rs20b to inflate current figures.

ISLAMABAD:

What appears to be an attempt to hide worsening performance, the Federal Board of Revenue has apparently manipulated tax collection figures aimed at showing higher than actual growth in revenue collection in the current fiscal year.

The tax authorities have apparently lowered the actual tax collection of November last year by roughly Rs20 billion to Rs151.7 billion aimed at inflating the growth in the current month by at least 13%, showed the collection figures reported by FBR and State Bank of Pakistan.

The FBR’s provisional results showed that it collected Rs175 billion in taxes in November this year, attaining a growth rate of 15.3% over November last year.

Had the FBR taken the actual revenue collection of Rs171.2 billion as reported by the SBP for November last year, the growth in this November would have been just 2.4%, which is even worse than the performance of the PPP government.

It is not for the first time the government has toyed with previous year’s statistics to claim good performance.

It was also accused of lowering the growth rate of PPP government’s last two years to claim higher economic growth rate in 2013-14. Yet, it could not achieve the revised GDP growth rate of 4.1%. The government has withheld the release of final figures, as the growth fell in the range of 3.3% to 3.5% for last fiscal year.

Due to apparent manipulation, the growth in revenue collection during the first five months (July-November) of the current fiscal year was also inflated by about 2%. The FBR’s provisional results showed that it collected Rs900 billion in taxes from July through November, achieving 14% growth over Rs789 billion collected in the comparative period.

However, the FBR had reported Rs806 billion revenue collection for July-November 2013 while the SBP reported Rs800 billion. On the basis of the FBR’s actual numbers of the previous fiscal year, the growth in revenue collection comes to just 11.7%, which is less than half of the pace required to hit current year’s revenue collection target of Rs2.810 trillion.

The FBR version 

The Rs175 billion in tax collection was till November 28 and was compared to the same day in 2013, which was Rs151.7 billion, said FBR chairman Tariq Bajwa. The November 28 was the last working day of the current month, which was also a half day. He said the reported figures were provisional and the FBR would use the actual revenue collection figure of November last year once the final figures of the current month are available.

Interestingly, the November 2013 was closed on 29th day, as there was holiday the next day.  Which suggests that the FBR didn’t collect Rs20 billion in a single day.

Impact on annual target

The current pace of growth suggests that the FBR would miss this year’s target by at least Rs200 billion. Sources said the FBR has conveyed the same to the International Monetary Fund. The FBR is now eyeing Rs2.610 trillion –a likely shortfall of Rs200 billion, which would widen the budget deficit by additional 0.7% of gross domestic product (GDP).

The FBR chairman did not comment on the status of the annual target but said that over 25% reduction in oil prices would significantly hurt sales tax collection. In November, the sales tax collection turned negative and FBR collected Rs84 billion in sales tax, which was less than collection of November last year.

The FBR’s sales tax collection will drop at least Rs60 billion in the current fiscal due to dip in oil and commodities prices, according to Dr Hafiz Pasha, former finance minister.

The FBR is supposed to collect Rs1.246 trillion in July-December period. With Rs900 billion in hand, the FBR needs to generate Rs346 billion in December, which will require 66% growth rate as against the current pace of less than 12%. In December last year, the FBR had collected Rs208 billion.

The chances of a downward revision in collection or cut on development spending have further heightened after the close of the fifth month of the fiscal.

Pakistan has given a commitment to the IMF that in order to achieve the overarching goal of reducing budget deficit to 4.9% of GDP it was ready to take contingency measures.

Published in The Express Tribune, November 30^th, 2014.

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