Govt to miss tax collection target by Rs600b

(The Express Tribune) by Shehbaz Rana

ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government is set to miss its annual revenue collection target by nearly Rs600 billion as it has so far collected Rs3.76 trillion despite a better response to the tax amnesty scheme in the last one week.

The extremely poor revenue collection has also made the next fiscal year 2019-20’s tax collection target of Rs5.550 trillion unrealistic – even before the start of the financial year. This will expose Pakistan to new pressure from the IMF.

The tax amnesty scheme, which will end today (Sunday), might be extended for one more day under the General Clauses Act of 1897. The 1897 law says in case of a holiday, the last date for completing an action will be considered as the next working day. However, on Monday, the banks will be closed for public dealing.

A senior official of the Federal Board of Revenue (FBR) said the federal government had requested the SBP to open banks on Monday for public dealing. So far, no decision has been taken.

FBR Chairman Syed Shabbar Zaidi said the tax amnesty would not be further extended, according to an official announcement by the FBR on Saturday.

“So far, 38,403 people have availed the tax amnesty scheme and another 33,815 cases are in process,” said Dr Hamid Atiq Sarwar, the official spokesman for the FBR.

He did not disclose the amount that the people paid in taxes while availing the amnesty scheme.

But a source in the FBR said less than Rs36 billion had been deposited in the kitty along with the tax amnesty declarations as people preferred to pay taxes at a later stage. The Assets Declaration Law allows people to file declarations till June 30 and deposit taxes later by paying penalties. The tax amnesty, which had been launched on May 12, got a very poor response in the first month and only 250 people availed it and paid Rs450 million in taxes. But it started getting good response in the last week, which also provided face saving to the FBR.

The PTI government had announced the scheme to allow people to declare their hidden domestic and offshore assets before launching crackdown against tax evasion. The government has offered the people to avail the scheme without disclosing their sources of income.

As many as 83,000 people had availed the Pakistan PML-N government’s last tax amnesty scheme and paid Rs124 billion in taxes. These people legalised Rs2.5 trillion worth of black assets last year.

Despite around Rs36 billion in amnesty payments, the FBR could provisionally collect Rs3.762 trillion in taxes till Saturday, according to sources in the FBR. The collection was down by 2% or Rs80 billion when compared with Rs3.842-trillion tax collection in the last fiscal year.

Despite a positive impact of the scheme, the collection was still far lower than the original annual target of Rs4.4 trillion and downward revised target of Rs4.150 trillion. Excluding the

impact of the tax amnesty scheme, the FBR’s collection was a mere Rs3.73 trillion.

The FBR is expected to cross the threshold of Rs3.8 trillion on the back of tax amnesty payments on the last day. Still, it will be short of the target by a record Rs600 billion.

For next fiscal year 2019-20, the government has approved Rs5.550-trillion tax collection target, which would require an unprecedented growth of 45% that has never happened in the history of Pakistan. This will expose the government to pressure from the IMF to either cut expenditures or introduce a mini-budget.

Out of the Rs3.762 trillion, the FBR collected only Rs1.4 trillion in income tax, showing a negative growth of 9.2% or Rs142 billion over the last fiscal year. The share of income tax collection in total taxes went down from 40% in the PML-N tenure to just 37%.

Sales tax collection stood at Rs1.45 trillion in this fiscal year – also showing negative growth of 2.6% or Rs39 billion.

Customs duty collection was higher by 11% or Rs70 billion and stood at Rs675 billion. It recorded a double-digit growth despite 20.5% reduction in dutiable imports. In a bid to contain the current account deficit, the government discouraged the imports, which also affected revenues at the import stage. Overall, the Customs Department collected 47% of total FBR’s revenues at the import stage.

Federal excise duty collection stood at Rs240 billion, higher by Rs34 billion or 16.5%.

All these provisional collection figures will slightly improve once final figures are available next week. But the FBR has missed its annual collection target by around Rs600 billion despite imposition of new taxes by the government during the course of the fiscal year and steep devaluation of the currency.  The FBR’s revenues were also affected by slowdown in economic activities, cut in the Public Sector Development Programme and relatively low prices of petroleum products in the first half of the fiscal year.

The shortfall in revenue collection would further widen the budget deficit to close to 8% of gross domestic product or nearly Rs3 trillion.

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