Punjab failing to boost tax collection

Updated February 06, 2020

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The Punjab government seems to be faltering in its effort to boost the provincial tax receipts, raising concern over its ability to achieve the budgeted tax revenue target of Rs294.9 billion for this fiscal year. — AFP/File
The Punjab government seems to be faltering in its effort to boost the provincial tax receipts, raising concern over its ability to achieve the budgeted tax revenue target of Rs294.9 billion for this fiscal year. — AFP/File

LAHORE: The Punjab government seems to be faltering in its effort to boost the provincial tax receipts, raising concern over its ability to achieve the budgeted tax revenue target of Rs294.9 billion for this fiscal year.

The provincial tax authorities could collect Rs104.6 billion in the first half of 2019-20, which forms just above 35 per cent of the target for the entire fiscal year, and is higher by 11.8 per cent from last year’s collection of Rs93.5bn.

The growth in the provincial taxes during the July-December period is marginally more than the average inflation rate of 11.1pc for the period, according to the provincial civil accounts.

The province is struggling to improve its taxes since the ascension of the Pakistan Tehreek-i-Insaf (PTI) government in Punjab in August 2018 with total tax receipts falling short of the budget targets.

During the last two fiscal years prior to the formation of the PTI government, the average collection in the first half usually constituted 40-42 per cent of the annual targets compared with 34-35 per cent under the new administration.

Officials blame widespread economic slowdown for “slower-than-targeted” growth in provincial taxes, conceding the lower collection will eventually affect the government’s development target as it was facing significantly gap in the federal transfers to the province because of a large hole of Rs387bn in the Federal Board of Revenue (FBR) collection so far.

They also agreed that the province will not be able to produce the promised cash surplus of Rs233bn as required by Islamabad to meet the consolidated budget deficit for the year under the $6bn bailout package from the International Monetary Fund (IMF).

“Like previous years, the province will not be bound to produce the surplus if it does no get the promised federal transfers during the year.

Since it appears impossible because of just 16.8pc growth in federal taxes, we will not be required to throw up the surplus,” an official said.

According to the civil accounts, the shortfall in its tax revenues from the federal divisible pool and provincial resources is forcing the provincial government to slow down the release of development funds.

In the first half of the financial year, the government has spent less than 30pc or Rs103.1bn from its truncated annual development programme of Rs350bn.

The pace of development in the province has however picked up in the recent months when compared with the corresponding period last year.

Published in Dawn, February 6th, 2020