July-October: Shortfall in tax collection widens ahead of reshuffle

Despite blocking refunds and taking advances, FBR collects Rs801b

ISLAMABAD: As uncertainty looms over the timing of an expected reshuffle of top management of the Federal Board of Revenue (FBR), the shortfall in tax collection has further widened, making the annual revenue target of Rs3.104 trillion unachievable.

Against the Rs856.6-billion target for July-October of the current fiscal year, the FBR provisionally collected Rs801 billion till Friday, despite blocking refunds and receiving advances from businesses and public sector worth billions of rupees.



“Furthermore, the Ministry of Finance also obtained Rs10 billion in advance after the FBR had exhausted all its options,” said a source in the finance ministry.

However, the Rs10 billion, taken in September, could not be timely deposited in the bank, due to which they are now reflected in the October collection.

“For accounting purposes, these advances will be booked in the first-quarter collection, aimed at showing a relatively decent figure of Rs600 billion,” said the source.



In order to support the FBR revenue pool, the government has been denying reduction in petroleum product prices to the consumers and has also increased general sales tax to unprecedented levels.

Currently, 50% GST is charged on high-speed diesel, while the standard rate is 17%.

The July-October collection of Rs801 billion was 12% or Rs87 billion higher from the collection in the comparative period of last year. A growth of 20% is required to hit the annual Rs3.104-trillion target.



“With the growing shortfall, the annual target is unachievable,” admitted an official. “As a result of the shortfall, the budget deficit target of 4.3% of gross domestic product or Rs1.318 trillion is likely to be missed.”

Sales tax refunds

The FBR, in an attempt to portray decent numbers, blocked refunds in October and paid only Rs2 billion against Rs8 billion in October 2014.

In total, the FBR gave Rs32 billion in refunds from July to October against Rs29 billion in the same period of last year.



The poor performance is one of the critical issues that the International Monetary Fund (IMF) will take up with Finance Minister Ishaq Dar during the upcoming round of policy talks beginning from Monday.

Pakistan and the IMF have held technical-level talks this week under the ninth review of the $6.2 billion bailout programme.

The finance minister has called a meeting of top FBR officials on Saturday aimed at pushing them not to block tax reforms.



FBR’s affairs have gone haywire and it is unable to resolve technical glitches in the electronic filing of income tax returns.

The extended last date for filing the returns for the previous fiscal year is October 31, which the government is likely to extend by another month to November 30.

According to sources, the finance minister is fully aware of the deteriorating performance of the FBR and wants to change the entire top team including the chairman. However, he is facing problems in picking a successor.

Published in The Express Tribune, October 31^st,  2015.

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