Revenue collection: PM toughens FY23 target regardless of import contraction

ISLAMABAD: Prime Minister Shehbaz Sharif has directed the FBR to achieve the revenue target of Rs7.6 trillion by June 30, 2023 against the target of Rs7.47 trillion, despite the fact chairman FBR hinted at reduction in collection of sales tax, custom duty, and federal excise duty due to import contraction, higher inflation, exchange rate, and interest rate polices, well-informed sources told Business Recorder.

The decision was taken at meeting on stocktake of ‘Strategic Roadmap’ presided over by the prime minister on December 6, 2022. The meeting was attended by ministers and secretaries, Finance, Privatisation, Industries and Production, and Power Division, Special Assistant to Prime Minister on Government Effectiveness (GE), Special Assistant to the Prime Minister on Strategic Communication, chairman FBR, and Sir Michael Barber, a public policy specialist.

The FBR will upgrade its track and trace system in sugar sector with all additional Rs20 billion tax collection in sugar sector compared to Rs7 billion (committee earlier) by June 2023. It will also share roadmap on the implementation on track system in remaining sectors i.e. cement, fertiliser, tobacco, beverages, and POL products by December 31, 2022

The SAPM on Government Effectiveness, Dr Jehanzeb Khan, provided an overview of the reform agenda by presenting an executive summary. He also highlighted that the PM would personally monitor implementation of strategic roadmap for which two hours are earmarked each week. Briefing the meeting on revenue, the SAPM on GE informed the forum that tax collection targets are on track in the first five months of the current fiscal year.

However, there is a need to rationalise expenditures by managing/controlling subsidies and pensions to achieve targets set at roadmap. He stressed on enforcement of track and trace in all relevant fields at by the FBR.

Revenue collection target: FBR members to brief Board-in-Council on strategy

Sir Barber supported the suggestion of regular stocktakes to meet deadlines of the strategic roadmap. He also suggested the FBR to employ a separate data set to initially identify BISP beneficiaries and remove them from their travel and vehicle data system. Frequent reporting can also facilitate to efficiently utilise prime minister’s crucial time.

The chairman FBR informed that revenue collection target is set at Rs7.47 trillion (by June 2023) which is 22 per cent higher than the previous financial year. The cumulative revenue targets are on track due to special initiatives by the FBR in broadening tax net, detection of misinvoicing, etc. However, issues i.e. import contraction, higher inflation, exchange rate, and interest rate polices may affect roadmap targets related to sales tax, custom duty, and federal excise duty.

On expenditure, the meeting was briefed that expenditure on regular spending grant during the last fiscal year was Rs714 billion which is alarming and must be monitored this year. The pensions need to be revitalized and managed through a direct credit system. Pensions to military personnel also need automation.

Secretary Finance requested the forum to revise the pension reforms deadlines to June 2023. The forum responded that it is a crucial matter which must be resolved at its earliest.

Updating on privatisation, Secretary Privatisation informed that privatisation’s targets include the PSMC, NPPMCL, Heavy Electrical Complex (HEC), First Women Bank Limited, and DISCOs. However inter-ministerial dependency issues hinder achieving roadmap targets.

Concluding the discussion, the SAPM on Government Effectiveness proposed inclusion of all reforms on revenue mobilisation, expenditure and privatisation to the Strategic Roadmap for effective follow-up and routine reporting to the prime minister.

After a detailed discussion and deliberation, following decisions were taken: (i) FBR to achieve the target of Rs7.6 trillion by June 30, 2023; (ii) FBR to upgrade its track and trace system in sugar sector with all additional Rs20 billion tax collection in sugar sector compared to Rs7 billion (committee earlier) by June 2023; (iii) FBR to share roadmap on the implementation on track system in remaining sectors i.e. cement, fertilizer, tobacco, beverages and POL products by December 31, 2022; (iv) Minister for Finance and Chairman FBR to review tobacco sector issues and prepare detailed presentation for the prime minister by December 30, 2022; (v) Chairman FBR to present in upcoming stocktake the strategy and implementation plan of integrating remaining tier-1 retailers in the next seven months by December 25, 2022; (iv) Chairman FBR to share with PMO the updated status on risk profiling of potential high net-worth taxpayers being carried out and the develop a plan/strategy to bring theses into net( immediate); (vii) Finance Division to rationalise pension expenditure by creating a pension fund by January 15, 2023; (viii) Secretary Finance to notify committee comprising Finance Minister, SAPM GE and Secretary Finance to resolve the issue of pension liabilities by December 31, 2022; (ix) Ministry of Defence to give presentation to Planning Commission and Ministry of Finance to chalk out plan/timeframe for automation of military pensions and its financing strategies by December 31, 2022; (x) The security environment in the country has improved. There is a need to revisit and consolidate security expenditure in civil budget, especially from pension perspective. Ministry of Interior in consultation with MoD and Finance Division to present recommendations by January 15, 2023; (xi) Privatisation Division to ensure timely completion of bidding process of Pakistan Steel Mills (PSM). The bidding process to be financed by January 15, 2023; (xii) PC in consultation with SAPM-GE to notify a committee to fast track the privatisation of PSM which will present a roadmap to PM in upcoming stocktake (deadline December 25, 2022); (xiii) Secretaries Industries and Petroleum to jointly resolve issue of payment of liabilities against PSM and share report to PM Office within a week ( December 25, 2022); (xiv) SECP to approve the Scheme of Arrangement (SoA) in align with the bidding schedule of the PSM by January 15, 2023; (xv) Petroleum Division to coordinate with SSGC to expedite settlement of outstanding matter regarding PSM by December 30, 2022; (xvi) NEPRA is required to issue NOC regarding PSM power plant in order to ensure smooth transfer of plan to Steel Corp; (xvii) Petroleum Division to coordinate with SSGC to withdraw litigation/stay order against PSMC and to facilitate transfer of Core Operating Assets as envisaged in the SoA by December 20, 2022; (xviii) PC to finalise the PSM Share Purchase Agreement (SPA) and Instructions to Bidder (ITB) within a weeks’ time by December 25, 2022; (xix) PC in coordination with MoFA to contact the potential PSM bidders in China and express urgency of GoP to lock the transaction at the earliest. PC to also coordinate with the concerned Ministries about SEZ status of Steel Corp by December 25, 2022; (xx) PC to immediately call the meeting of stakeholder to sort out issues related to privatisation of National Power Parks Management Company Limited (NPPMPCL) and share the outcome with SAPM-GE by December 31, 2022; (xxi) PC and Finance Division in consultation with Strategic Plan Division (GHQ) to expedite financial closure and fast track transition of privatisation of HEC by December 31, 2022; (xxii) Ministry of Finance to expedite the process of finalisation of the audited financial accounts for FY 2019, 2020, 2021, and 2022 of First Women Bank Limited –prerequisite for the privatisation entity by January 15, 2023; (xxiii) Power Division in consultation with PC to share a roadmap regarding private sector management/provincialisation of Discos by December 31, 2022 and; (xxiv) Finance Division in consultation with PM to identify untargeted subsidies during the FY 2022-23 by January 2, 2023.

All secretaries/heads of all lead and related ministries/divisions/entities are expected to complete their tasks within stipulated timeframe to ensure fast track completion of PM’s Strategic Roadmap.

Copyright Business Recorder, 2022