ISLAMABAD, Dec 12: The Central Board of Revenue (CBR) is experiencing decline in revenue from customs duties due to reduction in tariffs but is confident to achieve its Rs690 billion revenue collection target set for 2005-06.

“There is certain decrease in revenue from custom duties due to falling tariffs but, hopefully, we would manage 17 per cent growth in revenue during the current financial year,” said CBR chairman Abdullah Yousuf. Talking to Dawn here on Monday, he said that there had been 20 per cent growth in revenue during the last five months, which will, eventually, help achieve 17 per cent targeted growth during the remaining seven months of 2005-06. “And, as such, there is no reason why should we not meet our Rs690 billion, an all-time high revenue collection target,” he added.

“Generally”, the CBR chairman pointed out, “there is a growth in revenue from all taxes but sales tax and income tax are likely to make a major contribution in 2005-06, compared to revenue from excise and custom duties.”

“We are focusing on sales tax and income tax from where major chunk of revenue is expected this year,” said Abdullah Yousuf adding that the government wanted to have more revenues through internal resource mobilization.

In Pakistan, revenues, he pointed out, were increasing for the last five years due to implementation of positive policies and avoiding unnecessary favours to any segment of the society.

Total revenues are projected to grow at an annual compound growth rate of 10.5 per cent and tax revenues at 10.3 per cent during 2005-10.

However, the CBR taxes were estimated to rise at an annual compound growth rate of 11.1 per cent, and of these taxes, the highest growth of 12.7 per cent was projected in sales tax, followed by direct taxes 12 per cent, customs duty 7.3 per cent and central excise 5.6 per cent.

According to the latest government’s estimates, a relatively higher growth projection of sales tax among the indirect taxes would be, chiefly, the outcome of taxation strategy of expanding the VAT variant. Similarly, high growth projection for direct taxes, primarily, hinges on tax reforms to enlarge the tax net, plug tax loopholes and improve tax administration.

These tax reforms will be implemented by the CBR, under their tax administration reform programme project, being funded by the World Bank at a cost of Rs9.501 billion.

Moreover, in view of sensitivity of the issue of revenue collection and its enhancement and to monitor closely the reform process of CBR, a high powered federal committee is supervising the affairs of the organization.

Tax revenues collected by the CBR, during the next five years, are projected to increase at the rate of 0.3 per cent of GDP every year, as a result of initiation of second generation reforms and enhancing confidence of the taxpayers in tax collection machinery by adopting more facilitation measures, bringing changes in duty drawback system, refund procedures, good governance and introduction of automated taxation, which will help in minimizing unnecessary physical interaction between the taxpayers and the tax machinery.

Though, the enhanced share of revenues is likely to become available to the provinces from the federal divisible pool, under the new National Finance Commission (NFC) award, yet, there is a need to gear-up efforts for increasing revenues for diverting more funds towards community and social services and poverty alleviation as well as meet other development expenditures.

Revenue deficit is projected to be eliminated by the third year of Medium Term Development Framework (MDTF) period— 2007-08, with a view to tackling poverty, and increasing expenditures on social and community related services.

And, the development expenditures, as percentage of GDP, will also increase from 3.1 per cent of GDP in 2004-05 to 6.3 per cent in 2009-10. The increase is warranted to finance high priority projects for expanding physical infrastructure, improving social sectors and implementing poverty alleviation related schemes.