ISLAMABAD, Jan 18: The gradual slowdown trend in imports, particularly in dutiable imports has posed a serious threat to the government to achieve the annual tax target of Rs835 billion set for the fiscal year 2006-07.
This warrants a special attention towards other appropriate remedial measures like plugging the loopholes in customs collection. The decline in dutiable imports seriously hits the customs duties collection followed by revenue from sales tax and withholding tax.
The CBR’s first quarterly report 2006-07 released here on Thursday indicated that although CBR had accomplished the assigned target for July-Sept of 2006, the trend of decreasing dutiable imports, if continued, might create difficulty in achieving the revenue target for the remaining year.
On the other hand, the higher growth in the direct taxes has been possible due to vibrant economic activities in the banking, oil and gas and telecommunications sectors. The boom in the construction sector has also contributed positively towards this end. The improved voluntary compliance has been the result of various policy changes in the income tax regime.
There might be a need to search for new avenues for replenishing the erosion of revenues from the existing base. Improved enforcement, systematic audit and efficiency gains from the on-going reforms are some of the options that would have to be exploited, the report suggested.
Along with efforts to broaden the tax-base, it is equally important to reduce leakages as the gap between the taxes realized and their potential from the existing taxpayers, particularly the corporate sector, appears to be quite significant.
This difficult task can be accomplished through effective audit, for which the national audit plan needs to be completed on priority basis, the report recommended.Since different rates of duty are applied on imports any sudden decline in major commodities with higher ad valorem duty and specific rates of duty on items like vehicles, edible oils etc can seriously affect the collection of customs duty. On the other hand, valuation of imported goods is also essential for safeguarding government revenues, the report added.
The fluctuation in imports can cast straight impact on the collection of sales tax due to a flat rate of 15 per cent on all the imports. However, any decline in the import of raw materials results in the lesser claims of input in sales tax.
The report says that around 90 per cent of the value of imports has been contributed by only 26 commodity groups during the first quarter of the current fiscal year. Within this group, nearly 58 per cent of the import value is generated by POL products (27.1 per cent), machinery (20.3 per cent), vehicles and organic chemicals (5 per cent each).
A detailed review of these commodities confirms that electrical machinery (Ch: 85) has reflected a growth of 14 per cent. The transmission apparatus including mobile phones constituted 57.4 per cent of electrical machinery.
The growth in the imports of mobile phones during the first quarter has been 26.7 per cent while transmission apparatus excluding mobile phone grew by 16 per cent.
On the other hand the import of general machinery has reduced by 3.1 per cent.