ISLAMABAD: The Federal Board of Revenue (FBR) has reduced reliance on indirect taxes. Resultantly, the share of direct taxes in the total volume of revenue collections has crossed the ratio of 40 percent, sources said.
Source told Customs Today that the FBR had been following a policy along with administrative measures to reduce the share of indirect taxes in the total revenue collections.
“The very objective of these measures is to reduce reliance on the indirect taxes and administrative measure to bridge the gap and shortfall of revenue emerging in result of reduced reliance on indirect taxes” the source observed adding that over the years various policy and administrative measures had led to reduction in reliance on the indirect taxes.
While describing a few of administrative measures to this scribe, the source said that tax base of federal excise duty (FED) had contracted over the years and now was restricted to only few commodities like cigarettes, cement, beverages and services like international travel etc.
“Therefore, the contribution of FED in the total collection has also dropped to 8.1% in the fiscal year 2015-16” the source added.
Moreover, the source said that sales tax had also been re-structured as a tax on consumption, which was in line with the principles of equity and progressivity. Resultantly the contribution of direct taxes had increased significantly during past few years.
Therefore, the source said that a comparison of direct and indirect taxes in terms of contribution in overall federal taxes collected by FBR reflected that the reliance on indirect taxes had reduced to a great extent.
It is worth mentioning here that the choice of direct versus indirect taxes is fundamental to the optimal design of tax structures since those forms of taxation may affect differently the goals of efficiency and equity.
