ISLAMABAD: The Federal Board of Revenue (FBR) is following a policy of gradual reduction of corporate tax rates and rationalization of the tariff regime in customs for better trade and business activities.
Through these measures, the board wants to achieve revenue targets without passing through the process of revising the revenue collection targets because the FBR authorities are of the view that reduced corporate tax rates and rationalized tariff regime in customs will automatically expand the tax base.
Sources at the FBR told Customs Today that FBR collected Rs 3,367.9 billion during FY 2016-17 against Rs 3,112.5 billion collected during FY 2015-16 entailing a growth of 8.2 percent.
The revised revenue target for FY 2016- 17 of Rs 3,521 billion has been achieved to the extent of around 96 percent. An additional amount of about Rs 255.4 billion has been collected over and above the collection of Rs3,112.5 billion realized in FY 2015-16.
To a question about possible reasons for shortfall in revenue collection leading to revision of revenue collection target, the source said that in the year 2016-17, the target could not be met due to major reasons related to sales tax.
“In POL products sales tax rates on per liter basis remained 26-31 percent lower in 2016-17 as compared to 2015-16 sales tax rates. Whereas sales tax rate of urea fertilizers was reduced to 5 percent in current year as compared to 17 percent in the previous year. (iii) In the export oriented sectors like textiles, leather, carpet, sports goods and surgical goods were zero rated in 2016-17 as compared to 3 percent sales tax on them in previous year,” the sources ascertained.
The sources told that pesticides were fully exempted in 2016-17, whereas, previously, there was 7 percent sales tax on them. According to PM’s Textile Package, sales tax on machinery was reduced from 10% to 0% and on cotton from 5 percent to 0%. In the same way, customs duty and 1 percent additional duty exemption were cotton from 5 percent to 0%. In the same way, customs duty and 1% additional duty exemption were also given to cotton and other fibers.
Moreover, the sources said that sales tax and federal excise duty (FED) from cigarettes faced a shortfall of Rs. 49,925 million compared to the target due to increase in FED, resultantly increasing the price of tax paid cigarettes. If shortfall from the cigarettes is added to the above mentioned overall shortfall, the total shortfall comes to Rs 219,596 million.
