According to newspaper reports, the government has projected an overambitious revenue collection target of Rs 3.1 trillion for the Federal Board of Revenue (FBR) during next fiscal year whereas it has failed to achieve its target this year and revised it from Rs 2,810 billion to Rs 2,605 billion. According to financial experts, instead of setting reasonable and achievable target, the FBR opted for overambitious targets, resulting in shortfall of Rs 250 billion in tax collections. The government tries to achieve target by imposing higher tax rates whereas the experts believe this strategy will put extra burden on the business community. Instead of increasing tax rate, the government should broaden tax net as millions of businessmen, earning taxable income, use one way or the other to evade tax payments.
Some of the companies, including national and multi-nationals, are also involved in tax evasion. However, genuine taxpayers should not be harassed to achieve revenue collection targets while the government can raise withholding tax rates to a certain extent. According to experts, if the government makes a steep increase in withholding tax rates on non-filers of returns, they will prefer cash transactions and purpose of documentation of economy will be defeated. Collection of taxes is directly linked with the economic growth. Industry grows in the tax havens and it is an open secret. But the government also needs money and tax is one of the major sources of income to run the government affairs. The country has achieved hardly 4.2 percent GDP growth this year, but rate of sales tax has been increased by six percent. Fall in oil prices had brought some relief for the people, but the government has now started increasing prices of petroleum products, bringing even the common man under strain.
The prime concern before the government is the stabilisation of the economy, but it also has to take step for the revival of the economy by attracting foreign direct investment and offering tax concessions to local and foreign entrepreneurs. However, the foreign exchange reserves have increased and fiscal deficit are likely to remain around five percent. This will certainly have positive impact on the gross domestic projects. At least the economy has shown a marginal growth of 0.2 percent over the last year’s four percent growth. Fiscal policies only work when the government finds new sources of income generation and that is possible only by industrial growth. More industrial growth means more tax collections for the government.
