In March, 2017, the FBR recorded a growth of 16.1 % in revenue collection, as it collected Rs 345 billion against a collection of Rs 297 billion in the corresponding month of last year; however higher taxes (particularly withholding taxes on filers and non-filers was raised and the difference in the rates between filers and non-filers was widened) were applicable in March this year relative to March the year before.
In fiscal year 2016-17 the government budgeted Rs 517.3 billion higher FBR collection compared to the year before - in total terms the government envisages collecting Rs 3.621 trillion in the current year as opposed to Rs 3.103 trillion collected in 2015-16.
Sources in Finance Ministry on condition of anonymity said that if the rate of revenue collection continues for the remaining quarter of the current fiscal year, the shortfall would be over Rs 180-190 billion, which would make it difficult for the economic mangers to limit the fiscal deficit below 5 percent. The government has set the budgeted revenue collection target of Rs 3621 billion for 2016-17.
Finance Minister Ishaq Dar stated during press conference in Dubai after completing discussions on Article-IV Consultation with the International Monetary Fund that, "the shortfall that FBR experienced in the first eight months was due to the pro-growth incentives offered to various sectors of the economy particularly exports and agriculture; major item of revenue gap amounting to Rs 100 billion was due to not passing the full impact of the POL prices to the common man".
However POL prices do not account for more than Rs 48 billion shortfall for the entire year given that the Finance Minister declared recently that the monthly cost of not raising POL prices on the treasury would be around Rs 4 billion till January though he revised it downward recently to Rs 3 billion applicable to the month of April.
An official told Business Recorder that in 2016-17, lower duty rates on fertilisers account for a shortfall of Rs 48 billion, zero-rating for five sectors caused a loss of Rs 39 billion and the export package will have a negative impact of Rs 10 million in the current fiscal year. The combined shortfall from these relief measures accounts for a shortfall Rs 97 billion from what was budgeted, without taking note of the POL prices.
Sources however expressed optimism that the FBR would through ongoing initiatives of income tax, sales tax, Federal Excise Duty (FED), generate additional revenue in the remaining period of 2016-17. The initiatives include track and trace system for five major excisable commodities including cigarettes to generate additional revenue in last quarter of 2016-17.
The income tax initiatives during 2016-17 include taxation of real estate sector, imposition of withholding tax (WHT) on transfer of immoveable property, imposition of capital gains tax and taxation of builders/ developers under section 7C and 7D of the Income Tax Ordinance, broadening of tax base (more than 465,000 notices issued over the last three years), enhancing the scope of differential taxation and real time monitoring of withholding agents down to unit level through a digital assistant/ directory. The initiatives also included change in Audit policy and parametric selection of audit cases for tax year and rationalization of jurisdiction for optimal output ie corporate cases consolidated under corporate RTOs/ zones and remaining jurisdiction organised on territorial basis.
The sales tax initiatives covered checks on fake invoicing through Sales Tax Real Time Invoice Verification System (STRIVe), customised SAP application for ensuring proper monitoring of withholding sales tax from AG offices, establishment of tobacco enforcement network to counter illicit trade in cigarettes and development of track and trace system to record production and monitor sales for curbing evasion on 5 major items.
Information Technology (IT) initiatives included raising tax revenue, broadening of tax base through upgradation of data centres and capacity building of all online systems (IRIS, WeBOC, e-payments) and establishment of market monitoring and intervention unit and tax intelligence unit for better tax administration and compliance.
The initiative of Customer Relations Management (CRM) included establishment of complaint centre for prompt redressal of complaints/ queries, international agreements on tax avoidance, signing of multilateral exchange agreement (OECD) and bilateral agreement with Switzerland on exchange of information regime and Benami Transaction Law passed by parliament.
Copyright Business Recorder, 2017