Tax machinery manages to exceed December’s target

The Federal Board of Revenue must collect Rs157.5b every month to meet revised annual target.

ISLAMABAD: The tax machinery has collected Rs159 billion during the month of December, surpassing its monthly collection target for the first time this financial year.

The increased revenue for the month can be attributed to advance tax paid by businesses and some overdue administrative measures.

The Federal Board of Revenue (FBR) exceeded the revised monthly collection target by almost Rs12 billion, which also reduced the revenue shortfall during July through November.

The amount is almost 30 per cent higher than collection during the same month of the preceding fiscal year.

Of the total, almost half – Rs77.5 billion – was collected in direct taxes. “This is unprecedented as direct taxes historically constitute around 40 per cent of total collections,” said Member Policy Direct Taxes Asrar Rauf.

Another FBR official said that administrative efforts, such as the opening of new regional tax offices in Karachi and transfers of some officials from key positions, have also helped boost revenue. The RTOs were scheduled to be opened for operations in July.

The government also appointed Salman Siddique as new head of the FBR, in place of Sohail Ahmed. Siddique earlier served as finance secretary.

Collections under the sales tax head stood at Rs54.7 billion, about 25 per cent more than the receipts in December 2009. Federal excise duty collections stood at Rs9.5 billion, marking a growth of almost 10 per cent over the same month of the last year. Meanwhile, customs duty collections were recorded at Rs17.2 billion, an 18 per cent jump.

First half

The total collection during the first six months of the fiscal year has reached roughly Rs659 billion – 13.2 per cent higher than collection in the first half of the preceding fiscal and about 41 per cent of the revised annual target.

The government has now fixed Rs1,604 billion as the revised annual tax collection target, Rs63 billion less than the number declared at the time this year’s federal budget was announced. Earlier, independent economic experts and the Revenue Advisory Council had labeled the initial target of Rs1,667 billion ‘over-ambitious’.

Of the Rs659 billion collected during the six months, Rs240.6 billion – or 36.5 per cent – came in the form of direct taxes.

An amount of Rs281 billion was generated on account of sales tax, which is 15.8 per cent more than the same period in 2009. Federal excise duty collection stood at Rs57.5 billion, showing slight growth of 1.4 per cent. Customs duty collection clocked in at Rs80 billion after an increase of 12.3 per cent. The FBR needs to collect an average of Rs157.5 billion every month to meet the revised target in the wake of economic meltdown, power outages and political instability.

Published in The Express Tribune, January 4^th, 2011.