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Revenue collection may fall short of target

February 28, 2011

ISLAMABAD, Feb 28: The Federal Board of Revenue has informed the government that revenue collection will fall short of target by over Rs26 billion this year, Dawn has learnt.

A senior tax official said on Monday the finance ministry has been informed that barely Rs1,580 billion is likely to be collected, instead of the revised target of Rs1,604 billion, by the end of June 2011.

The revenue target was earlier projected at Rs1,630 billion on the assumption that the government would impose flood surcharge from March, and also take some revenue measures to raise additional revenue.

However, these steps were postponed amid fear of political backlash from the opposition parties.

However, experts are sceptical that the Federal Board of Revenue will be able to collect even Rs1,580 billion. In their assessment, the revenue collection would be in the range of Rs1,530 billion to Rs1,540 billion.

This low revenue collection will land Islamabad in troubles with the donors, as Pakistan had held out an assurance to the International Monetary Fund to achieve 0.5 per cent increase per annum in tax- to-GDP ratio.

But the revenue collection in the range of Rs1,580 billion by end June 2011, could mean that tax-to-GDP ratio will slip to 8.7 per cent instead of edging up to 9.5 per cent.

Revenue comes to the government's kitty mostly from voluntarily payments by taxpayers on the basis of self- assessment as audit has been suspended for the past few years to uncover concealed taxes.

Consequently, the Federal Board of Revenue mostly relies on growth in economy, especially rising inflation and import volume, the easiest way to pocket few billions for achieving the target.

Federal Board of Revenue reported on Monday that the total proposed collection in eight months (July-Feb) this year reached Rs865 billion as against Rs790 billion collected during the same period last year, showing a growth of 9.49 per cent.

In the current fiscal year, the income tax collection largely remained short of the target followed by the federal excise duty.

The only taxes that posted growth were the customs duty and general sales tax.

The customs duty growth was because of rising import volume, while the sale tax revenue was partly because of higher collections at import stage and double-digit growth in inflation that dragged collection at domestic sales.

Another official estimated that the only area where government could get some money was the arrears that were held up in litigation. There is an estimated Rs100 billion stuck up in various courts, the official said.