KARACHI: Despite low revenue collection in the first quarter, the tax managers have expressed the hope of achieving the target of Rs2.475 billion on the back of rupee depreciation and high inflation.
The Federal Board of Revenue (FBR) has collected Rs481 billion in the first three months of the current fiscal year, which is around 19 percent of the target assigned to the revenue body for the current fiscal year.
The tax managers said that the revenue collection should be around Rs544 billion, or 22 percent, of the total revenue to make smooth collection in the remaining months of 2013-14.
Officials said that the revenue collection in the remaining months will depend on rupee depreciation against the dollar, which would boost direct and indirect taxes on imports.
Pakistan Bureau of Statistics (PBS) has reported that the imports for the first quarter have registered a growth of three percent in terms of dollars to $11.17 billion from $10.85 billion in the same quarter last fiscal year. However, in the rupee terms, the figures have shown 12.15 percent growth to Rs1149.93 billion from Rs1025.31 billion.
The tax managers said that imported goods are subject to income and sales taxes and fall in the rupee value will help increase revenues.
The local currency witnessed six percent decline during July–September and experts said that the exchange rate would depreciate further due to huge repayments to the International Monetary Fund.
The second component for the revenue collection is high inflation during the current fiscal year, as prices have started to show upward trend after subsidy adjustment in the electricity tariff and increment in the petroleum products rates.
The POL prices are at an all-time high, which analysts say, will impact all consumer items.
Analysts said that though inflation for September contracted at 7.4 percent, it would have an adverse impact due to price hike in the petroleum products and electricity.
The government has announced three percent to four percent hike in transport fuel prices and 30 percent to 72 percent hike in domestic power tariffs for consumers above 200 units (average tariff up by 24 percent to 29 percent) effective October 1.
A report released early this month by JS Research revealed that the latter, part of the IMF agreement, could pose an upside risk to 9.5 percent FY14E CPI outlook where inflation numbers would escalate more sharply if the abovementioned power tariff hike shows up in the October CPI reading.
It said that the electricity tariffs have a 4.4 percent weight in the CPI basket where a 24 percent to 29 percent uptick in October would push up the base-case by 8.2 percent reading for the month to 9.4 percent to 9.6 percent, resulting in an estimated CPI for fiscal year 2013-14 of 10.4 percent to 10.6 percent.
The tax managers said that inflationary pressures always benefit in high sales tax collection, besides increase in the withholding income tax.
The FBR has been assigned Rs2.475 billion revenue collection target for the fiscal year 2013-14, which is over 27 percent higher than the last year’s collection of Rs1.939 billion.
The government in the federal budget had announced various revenue measures, including one percent increase in the sales tax rate to 17 percent.
The government also expanded the withholding regime for revenue collection and bringing new taxpayers into net.
