In the wake of floods surcharge and reformed general sales tax, the government may assign a new revenue collection target of Rs 1,689 billion (2010-11) to the Federal Board of Revenue as compared to the current target of Rs 1667 billion. The FBR would be required to collect an additional amount of Rs 22 billion during 2010-11 to meet the proposed target of Rs 1,689 billion during this period.
Sources told Business Recorder here on Wednesday that the breakup of the proposed revenue collection target of Rs 1,689 billion has also been worked out for 2010-11 taking into account additional revenue from the introduction of the reformed GST and flood surcharge during current fiscal. The whole budget is being reviewed including revenue collection target of the FBR.
Breakup revealed that the target of direct taxes has been estimated at Rs 736 billion for 2010-2011 as compared to Rs 657.7 billion for 2010-11. The target of sales tax has been estimated at Rs 639 billion as compared to the original target of Rs 674.9 billion. The revised target of federal excise duty (FED) has been worked out at Rs 141 billion for current fiscal as compared to Rs 154 billion. The target of customs duty has been estimated at Rs 173 billion as compared to original target of Rs 180.8 billion for 2010-11.
Sources said that the revision in the revenue collection target of the FBR has yet not been finalised. It depends on the final decision on imposition of flood surcharge as well as reformed GST. In case surcharge is being imposed at the import stage, it could be immediately collected. One the other hand, collection of income tax surcharge would take more time as compared to surcharge collected at the import stage.
Under the existing strategy to collect Rs 1667 billion in 2010-11, 20 percent of the total revenue collection target has to be achieved during the first quarter (July-September) of 2010-11. During the second quarter (October-December) of 2010-11, the tax machinery would have to collect 22.9 percent of the total revenue collection target. The FBR has to collect 26.8 percent of total revenue collection target during third quarter (January-March) of current fiscal. Over and above 30.2 percent of the total tax projections has to be collected during the fourth quarter (April-June) of 2010-11.
The government has informed the IMF that there will be serious pressures on the budget. Tax collection is likely to be lower owing to disruptions in economic activity - though the hardest hit sector, agriculture, is not a significant taxpayer - and possibly with weaker compliance.
Tax authorities have estimated that in the current quarter tax revenue will fall short by 0.3 percent of GDP and it is probable that the adverse effect on revenue collection will continue for some time.
Though it is too early to make more precise estimates, demand for budgetary resources is likely to increase substantially, initially because of the costs of rescue and relief operations, and later because of the huge reconstruction needs. These expected developments underscore the need for a reformed GST to broaden the tax base and enhance tax revenue as well as measures to rein in fiscal contingencies linked with electricity and other sectors, IMF country report said.