The Federal Board of Revenue has admitted that the revenue collection target has been revised downwards from Rs 1667 billion to Rs 1604.4 billion in view of revision of the overall budgetary framework. The FBR report on tax projections for 2010-11 issued on Wednesday revealed that the revenue target for 2010-11 was originally budgeted at Rs 1667 billion, but later on it was rationalised in the light of overall budgetary framework of the government.
The FBR has now been allotted a target of Rs 1,604.4 billion that required 21 percent growth over last year''s collection of Rs 1327.4 billion). The direct taxes will remain top contributor by having 40.9 percent share in the assigned national target on the other hand the net collection of sales tax would be around 39.5 percent, followed by customs duty with a share of 10.8 percent, and the rest will be contributed by federal excise duty (FED).
The report said that the economy of Pakistan has been jolted by a devastating floods in the country during the first quarter of the current fiscal year. The devastation has hit virtually all sectors of the economy, the impact on the population is truly staggering - over 20 million people have been affected. The economic damage has been estimated around $15 billion, or about 10 percent of GDP. Damage to infrastructure alone (roads, power plants, telecommunications, dams and irrigation systems, and schools and health clinics) is estimated around $10 billion.
The agriculture, which represents more than 20 percent of the GDP and provides employment to almost 50 percent of the workforce, has been extremely hard hit. At least 30 percent of the cotton crop has washed away, which is bound to devastate the textile industry. That will mean the textiles sector will have to import more cotton to feed the mills. The country will also face loss of wheat, rice, and maize crops, together with loss of about 10 million of livestock.
The overall growth of real GDP that prior to the floods was projected to be over 4 percent during 2010-11 is now likely to fall in real term to 2-3 percent range. The same was 4.1 percent during last year. However, reconstruction activity could provide some boost to the growth rate, but it is likely that any positive affects will only show up in 2011-12 and beyond, and even then it may not be sufficient to bring the growth rate back to the 2009 level of 4 percent for several years.
The report said that similarly, with higher transport costs and food shortages, inflation, which is already in double digits, will move up with the increase in food prices.
On the fiscal front, considerable efforts have to be made to keep the budget deficit under control during current fiscal, for which revenue generation is the key agenda item of the government. On the FBR part, a viable tax administration reform program is actively perused with the objectives to have a credible tax reform to ensure fiscal sustainability and to create fiscal space for increasing the social safety net, and increasing investment in human and physical capital. Moreover, in order to broaden the tax base and to correct the structural shortcomings in Pakistan''s tax system and particularly, to ensure horizontal equity in the taxation system, a broad-based (Reformed) General Sales Tax (RGST) is being implemented in the country. Besides, the Federal Board of Revenue has chalked out a feasible audit plan including audit of withholding taxes to check the revenue leakage. It is expected that with the implementation of these and similar other initiatives, the resource mobilisation efforts will get a momentum in the coming months of the fiscal year 2010-11, the FBR report added.
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