KARACHI, Aug 1: The Income Tax Department (Southern region) collected Rs35.458 billion in direct taxes during the financial year 2001-02, showing a fall of 7.3 per cent over the last fiscal (2000-01) when collection stood at Rs38.285 billion, official sources said here on Thursday.

A spokesman of the department told Dawn that a fallout of Sept 11 on the country’s economy resulting in slowdown in trade and business activity had its toll on the revenue collection as well.

There had been a major fall in the income tax collection which indicates that many business establishments suffered losses or were unable to make profits owing to difficult situation and somewhat recessionary trend, the sources added.

The fear of war between India and Pakistan for the last seven months also had its adverse implications on revenue collection, particularly during the last quarter of FY2001-02.

As a result of such negative pressures on the economy, income tax which is the biggest source of revenue among direct taxes, declined by 6.6 per cent to Rs35.102 billion from Rs37.583 billion a year ago.

However, the collection of income tax at import stage somewhat remained better at Rs16.427 billion as against Rs16.418 billion recorded in the last fiscal (2000-01).

The revenue collectors remained perplexed after the Sept 11 incident as taxpayers’ capacity shrank owing to slowdown in the economy as well as external trade, the sources added.

“Our task to achieve ambitious revenue targets have almost became next to impossible as the country’s external and internal trade suffered a lot in the aftermath of Sept 11 incident,” a tax official said.

Whereas wealth tax had been abolished by the government last year, the collection from outstanding dues and arrears continues to suffer as only Rs80 million had been collected on account of wealth tax during the out going fiscal (2001-02) compared to Rs499 million a year ago.

Nevertheless, there was an improvement in Capital Value Tax (CVT) which rose to Rs104 million during 2001-02 from Rs78 million last fiscal.

Similarly, workers welfare fund also recorded a rise to Rs171 million from Rs125 million. There was nominal increase in arrears at Rs209 million from Rs202 million a year ago. Out of the current demand the department managed to collect Rs656 million in 2001-02 compared to Rs468 million last fiscal. It is a remarkable achievement of the income tax department as it directly reflects upon its working.

There is a strong realization among tax collectors for promoting a tax culture based on voluntary compliance rather than adopting harsh measures which normally create fear and resistance among prospective taxpayers.