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Overdrive mode: Tax revenues

April 08, 2013

AFTER all the talk of out-of-the-box thinking, it looks like we’re back to the oldest gimmicks in the book. Everything the Federal Board of Revenue is doing these days is a reflection of how it has always behaved — except that in an interim government without a full-time finance minister, there’s much more room for discretionary authority to be exercised. We’ve seen the revenue target revised downward this fiscal year, as in previous years. Yet the FBR is still left with an upward climb of almost a trillion rupees in the final quarter of the current fiscal year. Delays in the appointment of a full-time federal finance minister are not helping since the interim prime minister is reportedly wary of taking any far-reaching decisions, like approving an amnesty scheme. Standing alone at the foot of this mountain, the FBR chairman appears to be acting vigorously to wring every additional drop of revenue out of the system, while pushing hard to expand the scope of his discretionary powers by trying to get a reluctant interim prime minister to approve the tax amnesty scheme.

All indications tell us this will end the exact same way it always does. Every final quarter of the fiscal year turns into a Herculean effort to meet an unrealisable target, and always the revenue target is revised around this point in time. Then come the shakedowns. This time they’ve netted the textile sector, with all its clout neutralised at the exit of the elected government. Now they’re brandishing their audit powers towards another set of companies. Additionally, they’ve hiked the sales tax on imported tea, which was brought down to 5pc in order to curb smuggling through the Afghan Transit Trade channel, and upped it to 16pc. After a year of talk about databases, and netting 3.5 million new taxpayers and the ironic wonders of amnesty schemes, clearly we’re back to the oldest playbook in the business all over again: shake down those who are already in the net.