The Federal Board of Revenue (FBR) has exceeded its first seven months tax collection target and pooled Rs2.57 trillion at a growth rate of 6.5% on back of higher collection of indirect taxes.
From July through January of fiscal year 2020-21, the FBR provisionally collected Rs2.57 trillion in taxes -higher by Rs158 billion or 6.5% over the same period of the last year.
The seven-month collection was also Rs20 billion more than the target of Rs2.550 trillion, which would partially help the tax machinery in achieving its next month’s target.
The Rs2.57-trillion collection was more than half of the annual target. Now, the FBR will require Rs2.4 trillion more at a rate of 51% to achieve the annual rate.
The International Monetary Fund (IMF) has projected a tax collection shortfall of over Rs350 billion and is asking Pakistan to introduce a minibudget.
The Ministry of Finance is also expecting a significant shortfall against the annual target.
Finance Minister Dr Abdul Hafeez Shaikh has advised the provinces to make realistic spending plans while keeping in mind possible shortfall in tax revenues.
The 57.5% of the FBR’s taxes are distributed among the provinces as their share under the National Finance Commission award.
It was also for the first time in six months that the FBR achieved its monthly tax collection target of Rs340 billion.
As against the target of Rs340 billion, the FBR provisionally pooled Rs363 billion, exceeding the target by Rs23 billion. This fiscal year, the FBR had earlier achieved only July’s tax collection target.
The revenue growth in January was 12.6%, which should provide a sigh of relief to the government. The monthly growth rate was higher than the inflation rate.
The government had set a tax collection target of Rs4.963 trillion for the FBR against the IMF’s desired target of Rs5.1 trillion. Prime Minister Imran Khan wants to bring administrative reforms in the FBR. The premier had also promised to end political interventions in transfer and postings in the FBR.
However, sources in the FBR told The Express Tribune on Friday that the top tax man was under pressure to appoint a person of tainted reputation as head of a large taxpayer office, which collects a major chunk of the total tax collection.
The pressure came ahead of retirement of the current chief commissioner large tax office, Karachi next month.
The sources said that the FBR had sidelined the officer for a longer period and now he was using the office of a constitutional position holder to grab the prized post. The FBR wanted to appoint another officer in his place.
They said that the pressure was so immense that the FBR may eventually have to accommodate the officer as a head of a regional tax office.
The FBR’s member operations refused to comment on the matter. Tax-wise collection details showed that the collection was more skewed towards indirect taxes.
The share of income tax in total tax collection further shrank to 36.8% and the government was burdening the economy and people with more indirect taxes. The income tax collection during seven months stood at Rs945 billion, higher by only 5.2% over the previous year.
The FBR missed the income tax collection target by a wide margin of Rs84 billion. However, the sales tax collection exceeded the target by Rs75 billion and stood at Rs1.075 trillion in seven months.
The growth in sales tax collection was 8.5%, which was better than the inflation rate. The collection of federal excise duty in the first seven months amounted to Rs149 billion, which was up by Rs5 billion. But the FBR missed the seven-month target by Rs22 billion.
Pakistan Customs collected Rs397 billion under the head of customs duty and exceeded the target by Rs56 billion. The Customs Department has managed to put some check on smuggling.
This has also helped to increase its duty and tax collection. Overall, the Pakistan Customs collected Rs1.13 trillion or 44% of the total seven months collection, including withholding taxes at the import stage.
In the first seven months of current fiscal year, the FBR gave Rs128 billion in tax refunds.
In a related development, President Dr Arif Alvi on Friday rejected a representation, filed by FBR against the order of Federal Tax Ombudsman (FTO), in a case of bogus tax refunds worth over Rs14 million made to a fake Registered Person (RP).
The president directed FBR to recover the amount paid on the basis of fake/flying invoices.
The president upheld the decision of Federal Tax Ombudsman (FTO) following its suo-moto action against the irregularities committed by the FBR field formations in registering, processing, and sanctioning and issuing sales tax refunds to fake RPs during the period 2012-13.
President Alvi in his decision wrote that “it was surprising and shocking that FBR failed to investigate fake claims where refund had already been made in full connivance with FBR officials,” according to a statement issued by the President’s Office.
The president stressed recovery of the embezzled money, saying that “instead of resistance by FBR to the suo-moto action by FTO, they should recover the precious money of the people of Pakistan”.
The FTO in its verdict, dated April 27, 2020, had directed the Chief Commissioner-Inland Revenue and Corporate Regional Tax Office (RTO), Karachi “to investigate and identify the officials involved in registration of fake RPs and initiate disciplinary/ criminal action against those found involved and report compliance within 45 days.”