Revenue short fall
The government had agreed for Rs.5.1 trillion tax and non-tax revenue collection with the International Monetary Fund (IMF) to get a bailout package of $6 billion dollars and ensure capital inflow from other multilateral donor agencies including the World Bank and Asian Development Bank. But because of greater emphasis on the inelastic resource mobilization from indirect taxes the target now seems very difficult to be achieved. The finance mangers tried to persuade the IMF for lowering the tax revenue targets by Rs. 1 trillion but could not succeed. The shortfall in tax collection has gone up to Rs.219 billion and may increase further till the end of current fiscal year.
The process of filing tax returns is going on a slow pace as so far 1.9 million people had filed tax returns and Federal Board of Revenue will be compelled to grant extension of few weeks. Independent economists are of the view that government may be able to generate maximum tax and non-tax revenue of Rs.4.4 trillion because of decline in the production of manufacturing sector.
The Inland Revenue Services Department drive of authentic tax profiling on the basis of CNIC has not achieved the intended results because of not correcting the addresses of wealthy people who have immovable properties of billion of rupees and possess fleets of expensive and big vehicles. Tax notices are sent on invalid addresses bulk of which could not be delivered by the couriers’ services. The Benami Properties Act is operational but despite loud talk action against the actual owners of such properties is nowhere in sight.
Custom department had launched a campaign to collect tax from traders selling smuggled goods but barring a few symbolic raids on shops selling non-custom duty paid goods the operation was stopped unfinished. In the tribal districts of former FATA and PTA people holds thousand of non-custom paid latest model vehicles. A pragmatic scheme of levying reasonable amount of custom duty for the registration of these illegal vehicles can generate billions of rupees of revenue.
Due political polarization the government deferred the implementation of decision of traders under the sales tax regime and caved in before them to end their protest. Now the FBR is going to install point of sales systems at 17500 big shop malls to increase sales tax revenue. The move voluntary at present and it remains to be seen how far it succeeds. The traders will resist the installation of this system of sales tax entry in the buyer’ purchase bills and online deposit into government exchequer because will it then provide exact assessment of trades income for the levy of income tax collection. Let us hope the government will succeed in documentation of economy program for increasing revenues from domestic source.