Despite tall claims of documentation and enforcement by the Federal Board of Revenue (FBR), direct taxes collection on account of 'demand creation' has shown a major decrease of 63 percent during the first quarter (July-September) during 2012-2013.
According to the FBR's latest quarterly review on tax performance, the collection on account of demand creation has decreased during the first quarter by 63 percent during current fiscal. The collection on account of demand creation was Rs 9,463 million during (July-September) during 2012-2013 against Rs 25,558 million during same period of 2011-2012, reflecting a major decrease of 63 percent. Of the two components of 'Collection on Demand' (CoD), the collection under arrear demand has significantly increased by 99 percent over the previous fiscal. This growth is mainly due to tax drive initiatives by the income tax department against tax defaulters and partially due to the disposal of the 'Brought Forward' cases. The second component, ie, current demand has yielded a negative growth of 72 percent over the corresponding period of previous fiscal. It is expected to receive a boost during the 2nd quarter of the year when initial assessment of the returns will be completed and cases will be ripe for audit/ assessment through random selection criteria.
The report said that of three major components of direct taxes namely; collection on demand (CoD), voluntary payments (VP) and withholding taxes (WHT), 60.7 percent of gross income tax is contributed by the WHT, followed by VP having 36.8 percent share in total; and 6.8 percent is contributed by CoD. In general, the performance of these sources of revenue has been almost consistent with the overall state of the economy. The WHT has registered a negative growth of 0.5 percent, CoD has yielded a negative growth of 63.0 percent. The reason for decline in collection of WHT is due to abolishment of RWUs (Regional Withholding Units) for operational reasons. Resultantly monitoring of withholding taxes has been assigned to enforcement and collection division. The collection from CoD depends on the departmental efforts and the lesser collection invites the concerned quarters to review the causes of decline in collection. The voluntary payment has registered a healthy growth of 20.5 percent during the 1st quarter of current fiscal. On the other hand, the other component of voluntary compliance is payment with return, where substantial growth has been recorded. Similarly, other direct taxes have also registered a substantial growth during the period under review, it added.