KARACHI, June 12: The increase in petroleum development levy (PDL) by Rs0.75 per litre and Rs0.25 per litre increase in the tax on other petroleum products could not help in overcoming revenue shortfall.

Although petroleum and gas surcharges contributed Rs5.23 billion ‘more’ than the targeted amount, this was insufficient to cover the revenue shortfall stemmed from lower tax collections, according to third quarter report (Jan-March 2001- 2002) of the State Bank of Pakistan, released on Wednesday.

SPB in its report says that the outlook for the current tax targets remains discouraging as the CBR has to collect over Rs48 billion per month on average during the last quarter of the year to the 2001-2002 target. Given the average collection of Rs 30 billion per month upto third quarter 2001-2002 and adjusting for the usual trends in tax collections, this target clearly looks ambitious. Thus the government is likely to be forced to revise its revenue targets for the fourth time. The tax revenue targets witnessed three downward revisions upto third quarter 2001-2002. Initially CBR tax receipts were budgeted at Rs457.7 billion, which was revised downward in August 2001 to Rs444.7 billion to account for the shortfall realized in actual tax collections during 2000-2001. In October 2001, revenue target was again revised to Rs 429.9 billion from Rs 444.7 billion due to September 11 incidents. The accumulated shortfall by December 2001 coupled with below target January 2002 receipts forced a third revision of 2001-2002 target to Rs414.2 billion.

The consolidated revenue receipts of federal and provincial governments were Rs9.2 billion higher than the target of Rs227.2 billion. This was entirely due to higher non-tax revenues, and tax revenues were Rs4.3 billion short of the target, whilst non-tax receipt surpassed the target by Rs 13.5 billion, more than offsetting the shortfall in tax revenues.

According to SBP report, the high non-tax receipts were largely driven by higher dividend income, SBP profit, sale proceeds from oil and gas and other civil administration receipts (including economic and social services receipts). The higher dividend paid by the PTCL and the OGDC were primarily responsible for the rise in dividend income, while gains on foreign exchange deals due to the appreciation of rupee against the dollar enabled SBP to transfer more profit to the government.

Although the government was able to cross the set target by Rs9.2 billion, the situation is far from satisfactory as the entire increase came from the non-tax revenue which is not a dependable source of income. The major and consistent source of government exchequer (CBR) tax revenues remained significantly lower than the targeted level.

In July-March 2001-2002, federal government tax revenues remained under stress as CBR tax collections witnessed a marginal 2.5 per cent decline to Rs269.8 billion against the revised target growth of 2.4 per cent for the same period and the 14.0 per cent growth recorded in the corresponding period last year.

The role of exceptionally high tax refunds in depressing July- March 2001-2002 net collection is particularly noteworthy. By end of third quarter 2001-2002, tax refund totalled Rs62.9 billion, a stunning Rs18.4 billion (41.2) per cent higher than the corresponding period last year.