Despite mini-budgets: Tax collection remains abysmal

Tax revenue stands at Rs230b in March, up by meagre 7.4%.

ISLAMABAD: Despite the government introducing four mini-budgets in the last five months, the Federal Board of Revenue (FBR) collected only Rs230 billion in taxes last month, registering a negligible growth rate of 7.4% against the required rate of over 20%.

According to provisional results, the FBR collected Rs230 billion in March, showing a growth rate of 7.4% over last February’s collection of Rs214.2 billion. It came closer to this figure after blocking tax refunds, with the tax authorities showcasing growing desperation.

Former finance minister Dr Hafiz Pasha estimated that the total revenue impact of the mini-budgets and one main budget introduced in June last year was Rs390 billion on an annualised basis. In June, the government had introduced Rs234 billion in taxes.

The growth in March remained below the required rate due to lesser advance income tax contribution from the oil sector, said a senior official of the FBR. He added that tax contributions from the oil industry on account of advance income tax remained roughly Rs15 billion less than the estimates due to plunge in global oil prices.

The oil companies pay advance income tax on the basis of their turnover and they subsequently adjust the amount while filing their annual income tax returns.



“The tax machinery cannot do much without revamping the present structure,” said another FBR member. He said there was no more buoyancy in indirect taxes and efforts have to be made to expand the income tax base.

In March, the FBR’s gross collection from income taxes amounted to Rs96 billion, which was even less than the collection made in last March. On account of sales tax, it collected Rs93 billion, which were roughly 15% higher than the collection made in the same period in 2014. Federal excise duty stood at Rs16 billion, while another Rs27 billion was collected on account of custom duties.

July-March collection

Provisional accumulative tax collection from July through March of this fiscal year amounted to Rs1.755 trillion, which was 11.4% or Rs180.6 billion higher than the collection made in the comparative period of the previous fiscal year.

However, the Rs1.755-trillion collection was achieved by blocking refunds of taxpayers. As against Rs83.3 billion refunds that the FBR paid in the first nine months of the last fiscal year, the tax authorities released only Rs51.6 billion in the current fiscal year.

The first nine month results show that the government will not be able to achieve the twice-downward tax target of Rs2.691 trillion.

Published in The Express Tribune, April 2^nd, 2015.

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