Spoiled by poor governance and an epidemic of coronavirus, the Pakistani government of Tehreek-e-Insaf (PTI) missed its initial tax collection target by a record 1.58 trillion rupees because it could consolidate nearly by 3,981 trillion rupees by the end of the financial year 2019 – 20.
But the collection of Rs3.981 trillion was better than the fourth revised down target of Rs3.9 trillion. From July to June 2019-20, the FBR temporarily pooled 3,981 trillion rupees, which was 154 billion rupees or 4% higher than in 2018-2019, FBR officials told The Express Tribune.
However, after adjusting the reimbursements of 100 billion rupees, which were granted from the budget and 30 billion rupees pending reimbursements from the textile sector, the 2019-20 collection was almost at the level of last year when the FBR had collected Rs.3,828 trillion in taxes.
The collection was partially affected by the spread of respiratory diseases. The FBR also lost more than 37 officers, including a grade 22 officer, Zahid Khokhar, due to the contagion. This time, the FBR did not resort to the practice of huge advances, although this trend continued until April.
New FBR operations member Mohammad Ashfaq also instructed his team not to force taxpayers to pay taxes on the advances. While breaking with previous practice, the FBR also paid tax refunds even on the last day of the fiscal year.
On Tuesday, FBR paid Rs 7.9 billion in tax refunds, which is an encouraging sign to build trust with taxpayers.
Tax collection for the third consecutive year, including two years of PTI government, remained below Rs4 trillion psychological barrier. The provisional collection of Rs3,981 trillion was short of Rs4 trillion despite the fact that the government, for the first time, paid Rs100 billion in tax refunds from the budget, which amounts to inflating revenues.
The collection of Rs3,981 trillion was Rs1,575 trillion or 28.4% lower than the initial target of Rs5,555 trillion approved by the National Assembly in June of last year.
The three downward revisions to the tax collection target occurred before the Covid-19 outbreak, while the fourth revision was made necessary by the lethal epidemic that has largely crippled industrial sectors and services.
To reach the target of 5555 trillion rupees, the PTI government had imposed the highest of Rs735 billion in additional taxes.
While conceding to the request of the International Monetary Fund (IMF) to set the tax collection target of 5555 trillion rupees, Prime Minister Imran Khan had taken personal responsibility for reaching the post.
The Prime Minister had called on his trustworthy Shabbar Zaidi as president of the FBR to achieve the goal. But Zaidi also could not resist political and bureaucratic pressure and resigned in February this year after being absent from office for two months.
The tax collection target of 5555 trillion rupees should be exceeded by 900 billion rupees even before the coronavirus epidemic due to the unsatisfactory performance of the FBR and the PTI government’s decision to compromise with pressure groups , including traders.
Losing the third opportunity in two decades to tie traders to the tax net, the federal government gave in to pressure last November and agreed to make sweeping concessions, including easing registration conditions, cutting taxes income tax rate of 66% and deferral of the CNIC condition.
Two major concessions – the exemption from sales tax registration for merchants paying up to 1.2 million rupees a year in electricity bills and owning a 1,000 square foot store – made CNIC condition largely ineffective.
During the last financial year, the FBR received Rs3.829 trillion in taxes, which was lower than the collection of the previous year despite two mini-budgets introduced during the year.
Even if economic activities had not been affected, the FBR would have missed its annual target of at least 900 billion rupees to 1 trillion rupees, according to Ashfaq Yousaf Tola, chairman of the Governmental Budget Anomalies 2020 Committee.
In April of this year, Tola associates said FBR tax collection could fall short of the target by reaching 1.5 trillion rupees to just 4 trillion rupees in the aftermath of the coronavirus epidemic. , which would further increase the country’s debt burden.
The FBR machines also had not cooperated fully with the former president of the FBR, Zaidi. Assignments of a few dubious officers at the head of the regional tax offices have also compromised tax collection, according to FBR sources. Some of them still hold key positions.
The FBR collected Rs1,492 trillion in income taxes during the past financial year – an increase of Rs68 billion or 4.8% over the previous year. A key factor in increasing the collection of income tax has been the reinstatement of taxes on mobile phones. The initial income tax target was Rs 2,027 trillion, which the FBR missed by a wide margin of Rs 535 billion.
The FBR provisionally collected Rs1,592 trillion in sales tax, which was Rs131.2 billion or 9% higher than the previous year. Collection was increased due to the removal of the 17% sales tax on domestic sales of textiles, clothing, surgical products, sports and leather goods. The initial sales tax target was 2,200 billion rupees, which the FBR missed by a margin of 608 billion rupees.
The tax mechanism collected Rs257.5 billion federal excise duties – up Rs16.6 billion or 6.9% compared to the previous year. However, his initial target for excise duty collection was Rs384 billion, which he missed by a margin of Rs127 billion.
Customs duty collection amounted to 619.3 billion rupees, down 60.3 billion rupees or 8.9% from the previous year. The initial target was Rs889 billion which FBR missed by a margin of Rs270 billion.
The FBR paid Rs134.8 billion in reimbursements during the year just ended, compared to Rs69 billion in fiscal year 2018-19. Repayments of Rs 134.8 billion are in addition to Rs 100 billion paid from the regular budget.
The massive deficit in tax collection will hurt the country’s fiscal sustainability. In the 2018-2019 fiscal year, Pakistan’s public debt to gross domestic product (GDP) ratio deteriorated to 88%, which is now expected to worsen to 92% due to the deficit in tax revenue and increased spending.
The finance ministry has forecast the country’s budget deficit to be around 9.4% of GDP due to a large revenue gap and increased spending.
“We were on our way and we had 17% collection but as soon as Covid-19 arrived it affected all the savings, so a direct consequence was that our target had to be revised to Rs3.9 trillion and we had Rs1 trillion shortfall, “Prime Minister Imran Khan told the National Assembly on Tuesday.
Prior to Covid-19, the FBR was expected to achieve 45% revenue growth, but revenue increased at the rate of 16.5%.
For the new fiscal year, the government has set the RBF target at 4,963 trillion rupees. But on June 13, the Prime Minister’s adviser on finance, Dr. Abdul Hafeez Shaikh, said, “I cannot say with [Rs4.963 trillion target] can be achieved, but we have to make an effort. “
He went on to say that the provinces should set their budgets while keeping in mind the past performance of the RBF and the difference between performance, projections and reality.
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