ISLAMABAD: The Federal Board of Revenue (FBR) may propose new taxation measures including the possibility of taxing banking profits in case it is unable to achieve the assigned revenue collection target of Rs536.53 billion in November 2022.
Sources told Business Recorder here on Sunday that the government has no intention o take new taxation measures in near future. However, some proposals have been drafted by the FBR which are yet to be approved by the Finance Minister. If the shortfall continues in November 2022, then there is a strong possibility of new taxation measures including a gradual increase in sales tax on petroleum products.
The FBR does not require Presidential Ordinance to impose sales tax on petroleum products. The gradual rise in sales tax on POL products would be done through the FBR’s notification. This measure alone could generate Rs 60-70 billion in the remaining period of 2022-23.
When asked about the estimated revenue impact from the new measures, sources said that the figure has yet not been finalized, but it would be over Rs 60 billion depending on the revenue collection position of November 2022. Under the proposed Presidential Ordinance, the new taxation measures could be equal to the amount of expected shortfall during the second quarter of 2022-23.
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The FBR has drafted an initial sketch of the proposal to tax banking profits from government securities and foreign exchange earnings. However, sources said that it is just an internal proposal and nothing is final in this regard. There are very less chances of finalization of the said proposal drafted by the FBR, sources claimed.
Another proposal is to further raise excise duty on cigarettes through the Presidential Ordinance, but it depends on the revenue collection position in November 2022.
The government has committed to the International Monetary Fund (IMF) to take contingency measures at the earliest signs of fiscal programme underperformance including: (i) immediate increase in the general sales tax (GST) on fuel, as a prelude to reaching the standard rate of 17 percent; (ii) further streamlining of GST exemptions including sugary drinks (Rs60 billion) and other unwarranted exemptions such as those benefiting exporters; and/ or (iii) increasing Federal Excise Duty on Tier I and Tier II cigarettes by at least Rs 2/ stick with immediate effect to raise at least another Rs 120 billion in revenue.
The break up of the target of Rs536.53 billion for November 2022 revealed that the target of income tax has been projected at Rs184.91 billion; sales tax Rs221.52 billion; federal excise duty (FED) Rs34.6 billion, and the target of customs duty has been projected at Rs95.5 billion.
The tax collection of the FBR stood at nearly Rs513 billion in October 2022 against the target of Rs534 billion, depicting a massive shortfall of Rs21 billion.
The tax collection during July-October (2022-23) amounted to Rs2,148 billion against the target of Rs2,143 billion, reflecting an increase of Rs5 billion.
The tax collection stood at Rs513 billion in October 2022 against Rs446.5 billion collected in October 2021, reflecting an increase of Rs65.5 billion.
The tax projection for the second quarter (October-December) 2022-23 has been estimated at Rs2,036.087 billion. In the first quarter of 2022-23, the FBR collected Rs1,635 billion.
Chairman FBR Asim Ahmad has already directed Chief Commissioners Inland Revenue to intensify enforcement efforts to ensure the achievement of the assigned target of Rs536.53 billion during November 2022. In this connection, the tax authorities have directed the field formations to enforce taxation and enforcement measures taken through the Finance Act 2022 to overcome the shortfall in November 2022.
Copyright Business Recorder, 2022