Federal Board of Revenue (FBR) Chairman Nisar Muhammad Khan Wednesday said the next phase of withdrawal of tax concessions and exemptions granted through Statutory Regulatory Orders (SROs) would be completed before the next federal budget (2016-17). On the conclusion of the Senate Standing Committee on Finance meeting here, he told reporters that the FBR has witnessed an impressive growth in the revenue collection during October and November 2015. In December 2015, so far the performance of tax machinery is satisfactory. Responding to a query, he added that the exemption/concessionary SROs would be withdrawn before the next budget.
The FBR Chairman informed the committee that the revenue collection target for 2015-16 is very challenging for the FBR. The revenue collection targets are mainly revenue estimates set within the context of the fiscal deficit and macro-economic indicators. The FBR has never said that Rs 3.103 trillion would be an easy target. The target is difficult but the FBR is striving hard to meet the assigned projections for current fiscal year.
In October 2015, 22 percent growth has been witnessed in revenue collection. The FBR has witnessed 28 percent extraordinary growth in November 2015 as compared to same period last fiscal year. Till figures of December 15, the FBR performance is satisfactory. The FBR would be able to recover shortfall of Rs 40 billion witnessed during the first quarter of 2015-16. We are on course and we do not see any further intervention or more taxation measures during 2015-16.
The FBR Chairman said that the FBR has ended the SRO culture in the country as no exemption or concessionary SRO has been issued during the last two years. He said that the government has set the annual revenue target of Rs 3103.7 billion while for the first quarter (Jul-September 2015) a target of Rs 640 billion was earmarked. The FBR collected Rs 600.2 Billion during this period. However due to spill over effect of recession in the global trade & economy and recent decline of international commodity prices, a phenomenon beyond control of the Government, major import and domestic economic streams of the country were adversely affected which dampened the revenue collection and resultant gap between the revenue target for 1st quarter and actual collection was opened up to the extent of 40 billion in current fiscal year.
He said that in order to set off the effect of above and to stabilise macro-economic indicators eg budget deficit, Government had to take various steps inter alia revision and adjustment of duty/tax slabs at import on non-essential or luxury goods. The State Bank of Pakistan had also recommended imposing Regulatory Duty (RD) on 1413 items to improve the balance of payment position and protect the pressures on foreign exchange. However, maximum care has been taken to ensure that such additional measures in no way impact the middle and lower income segments of the society. It also merits mention that improved economic management and resultant low inflation rate has reasonably benefited the middle and lower strata of the society.
The additional revenue measures included levy of RD @ 5 percent & 10 percent on 61 new non-essential luxury items. The RD has been imposed on non-essential luxury items mostly used by the upper class of society eg track suits, swim wear, over-coats, car-coats, ties, curtains, interior blinds, imitation jewellery, watches, video games, brief cases, dry fruits, etc.
Enhancement of RD by 5% on luxury/non-essential goods where RD was already in place (289 items) which include packed and branded food items, dog & cat foods, mineral waters, cosmetics, sanitary ware, air conditioners, refrigerators, electrical home appliances, chandeliers etc, he said.
He said that the government has increased 10 percent fixed duty and taxes on the import of old and used vehicles of above 1000 cc to 1800 cc and increased rate of RD by 10% on old and used vehicles of above 1800 cc. The increase influx of old and used vehicles was not only putting the domestic industry under stress but also adding to the POL consumption and environmental pollution excessively. However, old & used vehicles up to 1000cc, mostly used by middle income group, have been kept out of instant increase to ensure that common man is not affected by the raise.
The FBR Chairman said that the board has levied 1 percent additional customs duty across-the-board on import of goods. However, to diffuse the impact, though nominal, of this levy on socially sensitive items and industrial inputs, the following exclusion have been made:-
Firstly, imports by privileged persons, dignitaries, relief goods, charitable, educational institutions, hospitals. Temporary importation, Export processing zones etc under Chapter 99.
Secondly, agricultural machinery, essential raw materials and inputs for agricultural/pharmaceutical/textile/aviation sectors, socially sensitive items like vegetables etc, and other priority industrial sectors like renewable energy, coal mining, which have been given concessions under Fifth Schedule of the Customs Act.
Thirdly, raw materials, components etc for local industry (25 sectors), eg, artificial leather industry, pesticide industry, sugar mills, fan industry, flat rolling steel industry, electric motors, on import of which concession in customs duty is allowed under SRO 565(1)/2006 dated 5.6.2006.
Fourthly, import of fertilisers; import of Seeds and spores for sowing; import of Plant & machinery for manufacturing of goods and imports of used vehicles where duty and taxes enhanced; imports under SRO 568(l)/2014 dated 26.6.2014 where Regulatory Duty was already in place and telecom sector.
The FBR increased Federal Excise Duty (FED) levied on locally produced low and high tiers cigarettes: On high tier cigarettes, with retail price in excess of Rs 3,600 per 1,000 cigarettes, the FED has been increased from Rs 3,030 to Rs 3,155, for the lower tier cigarettes, the FED has been increased from Rs 1,320 to Rs 1,420 per 1,000 cigarettes. This measure will further discourage use of cigarettes.
Special care has been taken to levy the duty/taxes only on that class of people who can afford to pay and the common man is not adversely affected by these measures. Increase in domestic taxes has been avoided to protect the common man. These measures will also help improve the balance of payment position and protect foreign exchange reserves. Had these measures not been put in place then lower than expected revenue would have negative impact on the share of provinces. Yet, fresh negative fallout would have been the cut in the PSDP (Public Sector Development Programme) coupled with reduction in the resources for security-related operations going on, the FBR chairman added.
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