According to the statistics released by the Central Board of Revenue, the tax collections for the first four months of the current financial year (July-October) reflected a handsome improvement of 26 percent to Rs 166.6 billion as compared to Rs 131.6 billion of the corresponding period of last year. The target set by the CBR for the four months under review at Rs 150.8 billion was surpassed by 10.4 percent. The performance of tax collection departments will thus be seen as highly encouraging, which seemingly resulted partly from a well sustained implementation of reforms in the overall working of the taxation machinery.
Significant improvement in tax collections was noticeable in all segments, namely, direct taxes, sales tax, customs duty and excise duty, which may also be attributed partly to wide ranging upsurge in economic activity.
This could also be gauged from the rising tempo in imports which were about 30 percent higher in the first three months of the current financial year than the comparable level of imports during the same period last year.
The collection of direct taxes, including income tax and withholding tax, amounted to Rs 48.4 billion, showing an increase of 35.4 percent over the comparable amount of Rs 37.5 billion during the corresponding four months of last year.
There was a perceptibly favourable impact of Universal Self-Assessment Scheme in its present form which was launched by the CBR in the current financial year. The returns filed by the taxpayers under this scheme have yielded much better results than expected by the government, as indicated by the 35 percent increase in yields from direct taxes. One contributory factor to this increase was the liberal exemptions from withholding tax on imports of industrial machinery and raw material granted last year.
This was done to support increased industrialisation and production that indeed reflects CBR's urge to accelerate industrial development and employment generation. Another factor leading to substantial increase in the amount of direct taxes during the period under review appears to be the success of the CBR to a certain extent in its efforts to broaden the base of taxpayers.
A sustained progress in this direction may yield richer results with the inclusion of new taxpayers within the fold of taxpayers.
However, the subsequent policy moves by the CBR and its collectorates in respect of detailed audit of about 8 percent of total returns, it is apprehended, may shake the confidence of taxpayers who will naturally feel uneasy with the taxation department's ever-changing whims with regard to the methods of detailed audit of selected cases.
The sales tax collection showed a 17.4 percent increase at Rs 70 billion over Rs 59.6 billion recorded during the corresponding four months of last year. The improvement reflects a satisfactory pace in the registration of new sales taxpayers.
The CBR's campaign in this direction appears to have met with appreciable success. However, during the same period, the CBR paid sales tax refunds of about Rs 19.4 billion against delayed claims of a substantial amount. The sales tax regime has a promising potential for expansion with the rise in the tempo of economic activity.
The increase in the receipts of customs duty also proved to be very encouraging. An amount of Rs 32.5 billion from this source registered a 34.2 percent increase during the period under review over the comparable amount of Rs 24.2 billion for the corresponding four months of last year.
It is noteworthy that the rates of duty on some items, specially capital machinery, were reduced in last budget, yet the yield from the customs tariff has turned out to be substantially higher.
This may be explained by the fact that imports were on the increase during this period which included a rise in cost of imported crude oil and POL products. At the same time, imports of industrial machinery and other equipment were also stepped up by the industrial sector which is actively engaged in modernisation and replacement, particularly in the textile sector.
The collection of excise duty was 25 percent higher at Rs 15 billion than the previous year's corresponding period at Rs 12 billion. There can be no two opinions that an investment-friendly taxation system is necessary to contribute to a vigorous expansion in the country's economic activity which alone would simultaneously provide a boost to the government's tax revenue from both the corporate sector and non-corporate taxpayers.
An enlightened approach to the problems of taxpayers faced by them in the assessment of their tax liabilities would also enhance mutual confidence and trust between the taxpayers and the taxation officials.
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