FBR would have to collect Rs661 billion only in one month to achieve revised target during outgoing fiscal year
ISLAMABAD: Federal Board of Revenue has issued further refunds of Rs 31.3 billion to take the total amount of refunds issued during the year to more than Rs 100 billion in first 11 months as against Rs 54 billion issued during the entire 12 months of the previous year.
Meanwhile, Federal Board of Revenue during the first 11 months of the current financial year has also recorded a provisional net revenue collection of over Rs3,274 billion as against Rs2,854 billion collected during the same period of the previous fiscal year, excluding collection on account of book adjustments which depicts an increase of around 15%.
The provisional collection for the month of May 2018 is Rs351 billion excluding collection on account of book adjustments. The provisional collection for May 2018 stood close to Rs350 billion against Rs343 billion collected in the corresponding month of previous fiscal year.
The FBR has recorded a nominal increase of Rs7 billion or 2% over the revenue collected in May 2017.
However, the FBR is struggling to achieve the revised tax collection target during outgoing fiscal year despite it would generate additional revenue due to enforcement of new taxation measures of next year before June.
The FBR would have to collect Rs661 billion only in one month to achieve the revised target during outgoing fiscal year.
The federal government had already revised the tax collection target of FBR to Rs3,935 billion for the outgoing fiscal year from the Rs4,013. However, the FBR believes that it would achieve the revised target.
“The revenue collection trend during the first eleven months of the financial year augurs well for the efforts of FBR towards achievement of the assigned revised annual revenue target,” the FBR stated in a statement.
Over a period, the FBR’s reliance on indirect taxes, particularly on customs duties, is on rise. Despite downward revising total annual target, the FBR has instead further increased the customs duties collection target to Rs600 billion for fiscal year 2017-18. The upward revised custom duties target will be equal to 15.2% of the new annual target of this fiscal year. This at one time used to be less than 10%.
For the fiscal year 2018-19, the government has set the customs duties collection target at Rs735 billion, which will be equal to 16.5% of the next year’s target of Rs4.435 trillion.
Meanwhile, the additional revenue of around Rs25 billion is expected to be generated during outgoing fiscal year due to the enforcement of new rates of federal excise duty and customs duty from the last week of the current month. The increase in customs duties and federal excise duties rates has been enforced from the next day (May 23) of Acting President Sadiq Sanjrani’s consent to the Finance Bill 2018.
During the last five years, tax-to-GDP ratio increased to 13.7 percent from 9.8 percent in the past five years of Pakistan Muslim League-Nawaz government, while tax revenue climbed 106 percent due to reforms initiatives and growth in economic activities.
Tax revenue rose to an estimated Rs4 trillion for the current fiscal year from Rs1.94 trillion in 2012-13. The government had constituted Tax Reform Commission (TRC) to review direct and indirect taxes, rationalise import tariff, review autonomy and administrative structure of the FBR, and create border force to deal with the illegal movement of individuals and goods.
The TRC submitted its recommendations about reforms in FBR in February 2015 to the government.
The government constituted an implementation committee, headed by Advisor to the Prime Minister on Revenue for reviewing the recommendations of TRC.
Elimination of statutory regulatory order (SRO) culture is another major decision of the PML-N government. SROs/concessions worth more than Rs290 billion have been withdrawn during three years, commencing from 2014-15 to ensure level-playing field for all taxpayers.
The government significantly reduced the corporate tax rates to 30 percent from 35 percent in the past five years. Corporate tax rate would further reduced to 25 percent by tax year 2023. Import tariff of 30 percent was reduced to 20 percent.
The PML-N government, during its tenure, introduced Benami Transactions (Prohibition) Amendment Bill 2016, which was passed by National Assembly and Senate. The law will help the authorities curb property holding in the name of others.
The major initiatives of the government are to increase cost of business for non-compliant taxpayers. The present government created difference in withholding tax rates for filers and non-filers through Finance Act 2015.
The step was taken to encourage people to file income tax returns. Differential taxation for filers and non-filers increased number of filers to more than 1.4 million in FY2018 from around 750,000 in FY2013.
Different rates of adjustable withholding of income tax for the income tax filers and non-filers on certain transactions were introduced to broaden the tax net.
The FBR is also using third party data to broaden tax base. Initially, the objective was to register 300,000 new taxpayers in three years. FBR issued 513,468 notices and enforced 203,701 income tax returns during the past five years under the drive to broaden tax base, according to the documents.
