Shortfall in revenue collection blamed on internal struggle within FBR

The chairman has been facing stiff opposition since appointment.

ISLAMABAD: As global pressure mounts on Pakistan to mobilise domestic revenues, the tug-of-war in the top management of the Federal Board of Revenue (FBR) has intensified and allegedly contributed towards making a dent of Rs76 billion in tax collection in five months.

Sources within the FBR say that there are wide differences between FBR Chairman Sohail Ahmad and the members. FBR members dub the chairman an “outsider who does not have the knowledge” to run the tax machinery. An FBR member said on condition of anonymity that “the chairman was not appointing the right persons at the right places” that has resulted in revenue leakages.

The other allegation against Ahmad was that he failed to open two regional tax offices in Karachi and 67 compliance centres across the country.

Since his appointment, the chairman has been facing stiff opposition from within the FBR. He is from the district management group and is said to have a strong backing from the prime minister’s secretariat. After his appointment, three senior FBR members refused to work under him. One was transferred and the other two left the organisation.

“People with vested interests are leveling such allegations,” said Ahmad. He said that those who wanted postings in the new regional tax offices (RTOs) in Karachi were creating such a hue and cry. The RTOs and compliance centres cannot help generate additional revenues, he added.

Bearing in mind the reaction to the general sales tax bill, Ahmad said that he was carefully planning the opening of the compliance centres, as these could result in a public backlash and also cause more corruption in the FBR. The chairman said there was no shortfall in revenue as everything was under review.

Official documents show that up to November 29, tax authorities had collected Rs482 billion in taxes against a target of Rs558 billion. Collection was just 6.7 per cent more than last year’s revenues and much lower than what is required to achieve full-year target of Rs1.655 trillion. According to provisional figures, Rs83.2 billion was collected in November so far against a target of Rs118 billion.

A 27 per cent growth in revenue is needed to achieve the benchmark which, according to independent experts, is impossible in the wake of weak FBR administration and difficult economic conditions.

The State Bank of Pakistan (SBP) has also said that the target growth in revenue may not be achieved. Failure to collect the required taxes is compelling the ministry of finance towards pushing the central bank to printing more notes to meet soaring expenditures. In just three months, the government has borrowed Rs120 billion from the central bank, which is fuelling inflation, according to the SBP.

The international community has been pressuring Pakistan to mobilise its own resources instead of asking the world for aid to meet its expenditures. In a bid to generate additional revenues the government has submitted the general sales tax bill in parliament which will be discussed by the standing committee of finance and revenue on Wednesday.

The government has been revising the national budget in the aftermath of the floods. However, the International Monetary Fund and Pakistan have already agreed upon a new collection target of Rs1.655 trillion, which is Rs12 billion less than the target set in June.

The target is set on the assumption that the GST, flood surcharge and increase in special excise duty will be implemented from January 1, 2011. If the government is unable to implement sales tax reforms, then the collection target will be Rs1.595 trillion.

Published in The Express Tribune, December 1^st, 2010.