ISLAMABAD, May 17: The Central Board of Revenue (CBR) has suffered a revenue loss of about Rs60 billion in the first nine months of this fiscal year due to various factors and it is likely to swell further in the final quarter.
According to the CBR Third Quarterly Review Report 2007 released here on Thursday, the board, despite this setback, is expected to manage its affairs in reaching the target of Rs835 billion.
However, the report stated that those who wish that the CBR should ‘do more’ must realise that the board had suffered this loss because the factors were not taken into consideration at the time of making revenue projections for the fiscal year.
President Gen Pervez Musharraf recently in Karachi had said that he hoped that the revenue collection would reach Rs900bn-mark as against the projected target of Rs835 billion. He also said that the next year target would be more than Rs1.1 trillion.
According to the report, of total revenue shortfall there has been revenue loss on account of sales tax and customs duties by Rs20 billion and Rs17.6 billion, respectively during the period under review. These sources of revenue have missed the targets by 8.4 per cent and 16 per cent due to shrinking tax base.
This shortfall from these two sources was expected to swell further in the fourth quarter, which would be compensated through unexpected growth in revenue from direct taxes collection.
The overall growth in gross and net collection during July-March 2006-07 had been 19.4 per cent and 21.9 per cent respectively over the corresponding period of last year. The hallmark of this achievement is the performance of direct taxes, where the revenue target has been surpassed by Rs54.8 billion.
Although the over-performance by direct taxes has compensated the nine months accumulated loss emanating from indirect taxes, but the whole situation requires close monitoring to avoid further slippage.
CBR is taking due care to maintain the stable course of revenue collection so that there is no resource shortfall in the budget, added the report.
For this purpose, besides watchful review of indirect taxes, the performance of direct taxes is also being observed carefully to ensure continuity in the remarkable performance in the fourth quarter.
According to the report, a number of factors have contributed towards the decline in revenue from sales tax and customs duty. The most important being the deceleration in import growth. In fact, the growth in dutiable imports has turned negative during the current fiscal year.
The revenue projections assumed 15 per cent growth in imports and dutiable imports. Instead, the month-on-month average growth in imports has been slightly over 10 percent and in dutiable imports negative growth of four percent.
Secondly, the collection has declined for one-off factors. Due to domestic supply constraints, huge amount of sugar, fertiliser, and iron and steel were imported last year. Consequently, there was a significant jump in import-related taxes.
This year, the imports of these commodities have reverted back to normal behaviour but the base effect lingers on. Thirdly, the regime change has reduced the inflow of old and used cars thereby leaving behind a revenue loss.
Fortunately, the revenue loss on account of all these factors has been more than compensated during the first nine months through direct taxes and therefore, the overall performance remains on track.
The major source of this outcome has been the improved profitability of the corporate sector. Particularly the banking, telecommunication and oil and gas sectors have seen a vibrant economic activity. Incidentally, all these sectors have gone through a difficult phase of reforms that have improved their efficiency.
