Some of the factors including marginal increase in sales tax collection from petroleum products on imports, 28 percent decline in domestic sales tax collection (local stage/supplies) on POL products, zero-rating of inputs of five export sectors, less advance income tax collection and the substantial reduction in sales tax on Urea fertilisers and other relief measures taken in last budget contributed in comparatively less collection during first quarter (July-September) of 2016-17 against assigned target.
Responding to various queries on provisional revenue collection, the official spokesperson of FBR Dr Muhammad Iqbal told Business Recorder that the detailed reasons for any shortfall in revenue collection during this period will be shared with media after a comprehensive analysis once the collection figures are finalised. However, he emphasised that this could be due to factors beyond the control of FBR such as a decline in the collection of sales tax on POL products as according to the provisional figures available with him there was a 28% decline in the domestic collection of sales tax on POL products during the quarter as compared to the collection in the same period during the last year.
Reportedly, the FBR has provisionally collected Rs 625 billion during first quarter (July-September) 2016-17 against Rs 600 billion during same period last fiscal, reflecting an increase of Rs 25 billion. According to him, this fact also disproves the allegation that the government is not passing on the benefit of reduced petroleum prices to the consumers. He also pointed out that the sales tax collection on imports grew in the month of September period by only 1.26% over the last year and in view of the fact that sales tax on imports constitutes around 20% of the total collection by FBR the shortfall in collection vis-à-vis the assigned targets can be easily explained, Dr Iqbal opined.
He further explained that the major factor in less than expected growth of sales tax on imports could be the zero-rating of the inputs of five export sectors and the substantial reduction in sales tax rate on Urea fertilisers. He stated that these steps were taken in the recent budget to bolster exports and to support the agricultural sector but were bound to have adverse impact on FBR revenues.
He explained that revenue measures taken in the last budget will take some time to yield the desired yield and after the usual lag will offset the impact of the relief measures taken by the government for overall economic growth. Dr Iqbal pointed out that the collection figures for the month of September 2016 are still coming in and it is premature to talk about resultant shortfall vis-à-vis the assigned targets till finalisation of final figures.
He however, admitted that the collection trends so far show that the quarterly target will be missed but he was confident that despite being a cause of concern, this shortfall, the quantum of which is still to be determined cannot be termed as a disaster or failure of the economic policies of the government. In support of his arguments, he was of the view that FBR collected around Rs 40 billion as advance tax during the current quarter whereas in the corresponding period of the preceding year Rs 46 billion was received as advance income tax. The small decline in the collection under this head does not justify the allegations of taking any undue advances in the last year and can be due to the changes in the withholding tax regime and better enforcement of the relevant laws as the withholding tax collected from a taxpayer during a quarter is deductible from his advance tax liability for that quarter.
To another query on de-motivated tax machinery, he dispelled impression that the field formations were de-motivated due to any reason of not giving cash rewards and other perquisites.
The spokesperson vehemently stated that the field officers are committed to their official duties as members of the premier revenue collecting agency of the country and are fully cognisant of the vital role they are performing for ensuring the economic well being of the state. It was a result of their high professional standards and unwavering commitment that FBR was able to make the historic achievement of the assigned targets without any downward revision for the last year.
When asked about issues between customs and IRS officials, the spokesperson also denied the existence of any rift between the officers of the Inland Revenue Service and the Custom Service of Pakistan, he clarified that the relations between the officers belonging to the two service groups in FBR are extremely cordial and there is absolutely no friction or any unhealthy rivalry.