ISLAMABAD: The Federal Board of Revenue (FBR) has chalked out short-term and long-term measures to reduce anticipated shortfall of over Rs 230 billion in the second quarter (October-December) 2024-25.
The tax machinery has collected Rs 877 billion during October 2024 against an assigned target of Rs 980 billion, reflecting a shortfall of Rs 103 billion.
The FBR has collected Rs 3,440 billion during first four months of 2024-25 against the assigned target of Rs 3,636 billion set for July-October of current fiscal year, reflecting a shortfall of Rs 196 billion.
Rs91bn short of target: Q1 tax collection stands at Rs2.563trn
Sources told Business Recorder that the economic assumptions including GDP growth, imports, inflation and growth in large-scale manufacturing, used for setting the tax collection target for 2024-25 have been changed. Therefore, short-term and long-term measures have been finalised to tackle the expected shortfall in tax collection in the remaining period of 2024-25.
There were assumptions that the policy measures in shape of raising tax rates would generate Rs 1190 billion, enforcement measures Rs 320 billion, Rs 50 billion through retailers’ scheme, materializing revenues from Sindh and import plus LSM growth was projected to yield Rs 2047 billion. With changed macroeconomic numbers, the FBR had to face a shortfall on Sales Tax at import stage by Rs 147 billion during July-September (2024-25). The Income tax collection has gone up to Rs 1230 billion against the set target of Rs 1098 billion for the first quarter of 2024-25.
However, sources categorically said that the refunds have not been stopped to increase revenue collection. On specific direction of Chairman FBR, all pending Sales Tax Refund Payment Orders of exporters amounting to Rs. 32 billion processed in “Faster” system up to 30th Sep, 2024 have been disbursed on November 1, 2024.
The new tax law on enforcement measures has been vetted by the Law Division and would be promulgated through a presidential ordinance or presented before the Parliament.
The Directorate General of Intelligence and Investigation Inland Revenue, headed by most honest tax official, has declared war against the tax fraud. The arrest of 2 big individuals of corporate entities every month, involved in fake/flying invoices would be enough the give a loud and clear message to the companies involved in tax fraud. The FBR’s agency has framed new cases of over Rs 75 billion in such companies involved in tax fraud.
The FBR has finalised a new plan for issuance of notices to un-registered rich persons. Over 0.19 million individuals (high-net worth individuals) have been identified with third party data and notices are being issued to them.
The FBR has estimated tax liability of Rs 7 billion to be recovered from these non-filers. The tracking of these non-filers would be done through dedicated dash board of FBR. It is expected that the FBR will pursue 50,000 non-filers and subsequently issuance of assessment order in 25,000 cases.
Under the contingency revenue measures the government has agreed to increase federal excise duty (FED) on aerated/ sugary drinks and raise withholding tax rates on the import of machinery/ raw materials and contracts/ supplies/ services to generate additional revenue of Rs 10.8 billion per month during 2024-25.
The revenue impact of these seven contingency revenue measures is projected at Rs 97.2 billion in the remaining three quarters (October-June) of 2024-25.
The IMF in its latest report stated should the 3-month rolling average revenue collection fall short of the projected target by 1 percent, in consultation with IMF staff, the government will evaluate the adoption of one or more of the following contingency measures: (i) Increase advance income tax on import of machinery by 1 percentage point, expected collection of Rs 2 billion per month; (ii) Increase advance income tax on import of raw materials by industrial undertakings by 1 percentage point, expected collection of Rs 3.5 billion per month;(iii) Increase advance income tax on import of raw materials by commercial importers by 1 percentage point, expected collection of Rs 1 billion per month; (iv) Increase withholding tax on supplies by 1 percent, expected collection of Rs 1 billion per month; (v) Increase withholding tax on services by 1 percentage point, expected collection of Rs 0.5 billion per month;(vi) Increase withholding tax on contracts by 1 percentage point, expected collection of Rs 0.5 billion per month;(vii) Increase FED on aerated and sugary drinks by 5 percentage point, expected collection Rs 2.3 billion per month.
Copyright Business Recorder, 2024
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