ISLAMABAD: The Federal Board of Revenue (FBR) receipts will have to grow by 16.5 percent in the fourth quarter of the current fiscal year on year on year (YoY) basis to achieve the revised target.
The third quarterly report on The State of Pakistan’s Economy for the current fiscal year compiled by State Bank of Pakistan said the tax collection by the FBR posted a 17.9 percent increase in Jul-Mar FY14, compared to 4.9 percent growth witnessed in the same period last year.
“Despite this improvement, given the below target tax collection in the previous two quarters the fiscal authorities revised downward the annual tax collection target to Rs 2275 billion in Q3-FY14,” the report indicated that the inflow from the auction of 3G/4G licences in April 2014, although fell short of target, should bolster overall revenues in FY14 Q4.
The report said that around 51 percent of the increase in total collection was contributed by sales tax in Jul-Mar FY14, which was mainly due to the increase in tax rates.
According to estimates, 34.5 percent of the total increase in sales tax receipts was driven by one percent point increase in GST rate that was announced in the FY14 budget.
“While collection from direct taxes also remained strong, custom duties posted a 0.7 percent fall during Jul-Mar FY14, compared to 15.0 percent increase in the same period last year,” the report added.
This shift in tax incidence away from imports is required as a part of trade reforms, but its impact on the fiscal side cannot be ignored. A more detailed look shows that around one-third of total customs duties are collected from import of vehicles, petroleum products and edible oil.
The report further added that growth in the import value of these items has been subdued during the year the import of automobiles (completely built units) is declining as the age limit of re conditioned cars was reduced from five to three years in December 2012; the import value of petroleum products was lower in Q3-FY14 compared to the previous two quarters (due to stable international prices); and palm oil import fell in Jul-Mar FY14, mainly due to a rise in international prices. Non-tax revenues posted a healthy increase in Jul-Mar FY14.
While CSF inflow remained weak, non-tax receipts were shored up by other factors during Jul-Mar FY14. For instance, SBP profits witnessed a sharp increase due to the transfer of arrears from the previous year; the one-off markup from PSEs as part of circular debt adjustment along with transfer in Universal Service Fund (USF) and Research and Development Fund (RDF); and the collection of Gas Infrastructure Development Cess (GIDC) resumed in January 1, 2014.
