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The government has included Rs 195 billion collection on account of non-tax revenue in other taxes with the objective to claim higher tax collection. Finance Minister Ishaq Dar has transferred non-tax revenue collection of Rs 145 billion on account of Gas Infrastructure Development Cess (GIDC), a dedicated fund for construction of Iran Pakistan and Turkmenistan Afghanistan Gas Pipeline (TAPI), under other taxes. It was placed under non-tax revenue till 2013-14.
Additionally, the Finance Minister also included non-tax revenue of Rs 30 billion on account of Natural Gas Development Surcharge (GDS) under other taxes. It was placed under non-tax revenue till 2013-14. An official stated that addition of Rs 175 billion has helped show higher tax-to-GDP ratio. He further stated that the government has been unable to undertake tax reforms to broaden the narrow tax base and was using accounting tactics to show higher tax-to-GDP ratio. The Federal Board of Revenue (FBR) officials claimed that the proportion of direct taxes has increased steadily - from 32 percent to 40 percent - and indirect taxes which were 68.5 percent of total FBR tax in fiscal year 2006-7 have been reduced to 60 percent in fiscal year 2015-16.
Economists maintain that the rise in direct taxes can be attributed almost entirely to the growing reliance on withholding taxes, they are projected to constitute around 75 percent of total direct tax collections in fiscal year 2016-17; however these withholding taxes are not on income, from various sources for example rent etc, but on consumer items and services or in other words they are in the sales tax mode which is an indirect tax.
Economists also accuse the government of releasing gross as opposed to net revenue figures by including refunds payable as revenue as well as taking advance income tax from big cooperate entities and banking sector before the end of the fiscal year to show better revenue figures. The FBR has provisionally collected Rs 3,112 billion during 2015-16 against the assigned revenue collection target of Rs 3,103.7 billion, reflecting an increase of Rs 8.3 billion. During the period July-May (2015-16), direct tax gross collection stood at Rs 1,005 billion, sales tax at Rs 1,186 billion, Federal Excise Duty (FED) at Rs 158 billion and collection of customs duty was Rs 348 billion.

Copyright Business Recorder, 2016

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