ISLAMABAD: The Federal Board of Revenue (FBR) faced Rs19 billion revenue collection shortfall in fiscal year 2017-18 mainly due to decline in consumption of furnace oil.
According to a report released by the FBR, fall in furnace oil demand and a decrease in subsidies contributed to the tax regulator failing to meet its revised annual tax collection target of Rs3.935 trillion for FY18, amassing Rs3.751 trillion.
The FBR prepared a comprehensive analysis to ascertain reasons behind massive revenue shortfall.
The Finance Ministry has not yet officially released the exact figure of budget deficit, which might go close to 6.9 percent of gross domestic product.
The apex tax authority said the country’s main taxation intelligence outfit remained unable to take actions against money laundering after suspension of a statutory regulatory order (SRO) by a high court. Both the last Pakistan Muslim League (Nawaz) and caretaker governments could not get approval from the cabinet to re-enact the SRO despite experiencing difficulties after the Financial Action Task Force put the country into its grey list.
The FBR said it had to lose Rs11.2 billion in revenue due to suspension of Intelligence and Investigation (Inland Revenue) operations and some SROs (116 and 117(1)/2015 and 611(I)/2016). The suspension of Intelligence and Investigation pushed down revenue to Rs1.2 billion in 2017-18 from Rs.12.4 billion in the preceding fiscal year.
FBR further said the decline in local sales of sugar and increase in exports of the sweetener on subsidies wiped off five billion rupees during the last fiscal year. The decrease in federal excise duty on natural gas due to lesser supply of natural gas had a negative revenue impact of three billion rupees.
The FBR, in the report, said it made excessive refund adjustments during the year, while reduced profits of banking sector and decline in withholding tax on telecom sector were among the major reasons behind the decline.
Excessive refund adjustments caused loss of Rs19 billion in July-June. The advance tax/demands from taxpayers were adjusted against pending refunds, leading to short realisation of Rs19 billion.
The FBR said the government intervention in power production led to a decrease in consumption of furnace oil, thereby giving a negative revenue impact of Rs19 billion during the last fiscal year. FBR estimated that taxes on petroleum products were cut by Rs10 billion, although tax experts said the revenue loss under the head came to Rs60-70 billion.
The FBR lost Rs8.6 billion due to reduction in withholding taxes from telecom operators. The rates of withholding tax were reduced to 12.5 percent from 14 percent. The FBR faced decline of Rs8.3 billion under advance tax on capital gains on securities.
Sales tax on fertiliser and pesticides was cut to five percent from 17 percent, causing eight billion rupees in losses. The FBR collected Rs1.488 trillion as sales tax during 2017-18 against the downward revised target of Rs1.541 trillion, registering a shortfall of Rs53 billion.
The FBR collected Rs1.441 trillion in income tax during 2017-18 against the downward revised target of Rs1.562 trillion, registering a shortfall of Rs121 billion. The FBR also collected Rs216 billion as federal excise duty in 2017-18 against the downward revised target of Rs232 billion.
The FBR witnessed negative impact of Rs45 billion due to payments of sales tax refunds in 2017-18. The FBR issued sales tax refunds to the tune of Rs71 billion in 2017-18 as against Rs26 billion a year earlier. Tax revenue from banking sector was cut by Rs26.4b.
