Shortfall in direct taxes: four factors identified

The Federal Board of Revenue has identified four major reasons of revenue shortfall in direct taxes during FY11 - unsatisfactory creation of current demand, low performance of withholding tax regime, slow progress in arrears recovery and stuck up amount in court cases.
The FBR on Friday issued instructions to all Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to focus on these four areas to generate additional revenue during the remaining period of current fiscal year. The FBR instructions are: the field formations should make extra efforts in the remaining less than four months of current fiscal year for achieving the revenue collection target. The shortfall is visible due to creation of unsatisfactory cases framed against the taxpayers below the mark. Secondly, low performance of withholding tax regime is due to virtual monitoring of withholding tax.
The level of performance of withholding tax could be judged from the fact that the growth in withholding tax is 8.3 percent in 2010-11 as compared to growth of 18-20 percent in the corresponding period of last fiscal. This is due to very low deductions of withholding taxes in major areas in the absence of monitoring of withholding agents. Another major reason of revenue shortfall is that the huge amount of arrears demands have been stuck up in courts.
The FBR directive further stated that the FBR has the Chief Commissioners have discussed the Article 199(4A) of the Constitution for vacation of stay orders where 6 months have been passed since grant of stays by various courts. It has been observed that the huge amount of arrears demands has been stuck up allegedly due to injunctions by various appellate forums. It has been noted that in most of the cases stay orders granted were beyond the limit of six months as prescribed in Article 199(4A) of the Constitution, but the LTUs as well as the RTOs were unmoved perhaps waiting for something to happen automatically. As per opinion of the Legal Advisors of the FBR, the advocate on record should on the expiry of six months file an application in the High Court for recovery of the income tax demand.
The FBR has further directed all LTUs and RTOs that fresh applications for vacation of stay orders shall be moved under the direct supervision of the Chief Commissioners who will submit fortnightly report to the FBR Member Inland Revenue on a regular basis.