WEDNESDAY MAY 15: Dismal first half revenue performance: economic slowdown blamed

ISLAMABAD: While officially admitting downward revision in revenue collection target (2012-13), the Federal Board of Revenue (FBR) on Tuesday said that the lower than expected revenue performance of tax machinery during first half (July-December) of 2012-13 reflects the impact of persistent economic slowdown. The FBR's quarterly review issued here on Tuesday revealed that Pakistan economy has been going through tough times.
Major challenges faced by economy were power outages, low growth, falling investment, huge fiscal deficit, inflation, unprecedented floods and law & order situation. Amid these challenges government tax revenues could not grow adequately in current fiscal year, particularly because imports did not show a healthy growth. The double digit growth pattern in tax revenues maintained during last 10 years, therefore, could not persist. The lower than expected revenue performance during first half of current fiscal year reflects the impacts of persistent economic slowdown.
The FBR revenue target for the fiscal year (2012-13) was fixed at Rs 2,381 billion at the time of announcement of Federal Budget. Keeping in view unfavourable condition of the economy, the target has been revised to Rs 2,193 billion. FBR has collected Rs 889 billion net revenue during July-December 2012-13, despite unfavorable macroeconomic situation and power & gas outages. The collection has registered a growth of around 6 percent over the corresponding period of last year.
The FBR said that Pakistan economy is passing through a challenging phase. On one hand, energy crisis, low imports and lesser demand have impacted the economy badly and on the other side, worsening law and order situation has posed severe threat to the growth momentum as well as investment. In these difficult times, the economy has shown some signs of improvement like decline in inflation, increase in remittances and also marginal improvement in Large Scale Manufacturing (LSM). Since resource mobilisation is linked with the performance of macroeconomic indicators, therefore, the revenue collection process has also been adversely affected. However, FBR has devised a strategy to broaden the tax base by broadening the tax net. Effective audit and enforcement together with automation are the key indicators for greater resource mobilisation. The compensation of the deficit in revenue of the first half of current fiscal would need extraordinary efforts by the field formations.
The collection under direct taxes has been Rs 337.5 billion which is higher by 8 percent as compared to the corresponding period of last year. The revised target has been achieved to the extent of around 91 percent. Similarly, an amount of Rs 381 billion has been collected under the head of sales tax during July-December, 2012-13 indicating a growth of just 2.9 percent over the collection of Rs 392.2 billion in the comparable period of last year. The target of Rs 428 billion has been achieved to the extent of 92 percent.
As far as customs is concerned, an amount of Rs 107.4 billion has been collected during the first six months of current fiscal year as against the target of Rs 111.1 billion. The target has been achieved to the extent of 97 percent. The collection of customs duty has recorded a growth of 14.6 percent over the collection of Rs 93.7 billion in the corresponding period of last year. The collection under the head of FED has been Rs 51.9 billion during the first six months of FY 2012-13 against the target of Rs 49.7 billion fixed for the same period.
The reasons for lower growth in collection have been recession in the economy, impact of energy crisis on manufacturing sector, slump in dutiable and taxable imports. A look at the monthly collection indicates that apart from the month of September the growth has not been impressive in rest of the months. It started with a negative growth in July and a nominal growth of 2.4 percent in August, 6-7 percent in October and November and then a big dip in December, the FBR added.