The Federal Finance Minister, Shaukat Aziz, unravelled the figures of tax collections for the full year of 2003-04 at a press conference in Islamabad on Wednesday (June 30) which was the last day of the financial year. It is indeed commendable to note that the collection figures were speedily compiled by the Central Board of Revenue (CBR) on the last day of the fiscal year, which indicated that the figures of each type of taxes compiled by different regional offices of the CBR were sent to the head office without any loss of time.
The prompt reporting of collections may be seen as a testimony to the success of the CBR in the adoption of automation or computerisation in the working of its various departments throughout the country.
The Finance Minister was rightly proud to announce that the actual tax collections for the year slightly exceeded the prescribed targets in all types of taxes.
The actual collections reportedly amounted to Rs 510.6 billion as compared to the targeted figure of Rs 510 billion, while the increase over the previous year's collection level of Rs 460.6 billion worked out to 10.9 percent.
This was attributable, in the first instance, to the vigorous efforts of the taxation departments to combat tax evasion.
The measures by way of reforms taken by the Central Board of Revenue during the last two years included establishment of large and medium taxpayers units, adoption of Universal Self-Assessment Scheme for the recovery of income tax, extensive survey for broadening the taxable base, improved performance by the regional tax departments, etc.
According to earlier reports, the survey has contributed to an increase in the number of taxpayers filing returns from 1.1 million to 1.5 million. The CBR's target for the next year is to increase the number of taxpayers to 2.0 million.
It may be hoped that a further improvement in the performance of the taxation departments, combined with implementation of reforms in the taxation strategy would make it possible for the CBR to further broaden the base of taxpayers as envisaged.
Of the various types of taxes, direct taxes amounted to Rs 159.1 billion against the target of Rs 160.0 billion indicating a minor shortfall which, Shaukat Aziz felt, would be removed on the compilation of the final figures by the CBR. The target of sales tax was achieved to the extent of 100 percent at Rs 218.0 billion.
This could be interpreted as a surprising matching of actual collection with the prescribed target without the slightest variation one way or the other.
The collection of customs duty amounted to Rs 89.3 billion, exceeding the target of Rs 88.0 billion and reflecting an improvement of Rs 1.3 billion. The collection of excise duty also slightly exceeded the target and amounted to Rs 44.2 billion against the target of Rs 44.0 billion.
The encouraging accomplishment of tax collections in pursuance of the prescribed targets was fully reflected in the sharp impetus to the national economy's growth and the consequent spur to GDP growth to 6.4 percent as against the projection at around 5.4 percent and 5.2 percent in the previous year (2002-03).
The full impact of the higher GDP growth rate may be expected in the form of much better level of tax collections in 2004-05 for which the tax collection target has been set at Rs 580.0 billion or a 10.4 percent increase over the last fiscal's collections.
This increase would appear to be much lower not only in the context of 10.9 percent increase recorded last year over the previous fiscal year's figures of collection but also in relation to the high rate of GDP growth.
In the ultimate analysis, therefore, the tax collection target should be revised substantially upwards for the current financial year otherwise the ratio of tax collections to GDP, it is quite likely, would decline as compared to the corresponding ratio of the previous year.
It may be pointed out here that as a result of the relatively lower rate of growth in tax collection in 2003-04, its ratio to GDP stood lower at 11.0 percent than the preceding year's corresponding ratio of 11.5 percent (Economic Survey 2003-04).
This disturbing trend also points to the need for a more vigorous drive to increase tax collections, although the Finance Minister is reported to have expressed the view that the tax collection target for 2004-05 was substantially high.