It was described in a previous post in this blog that when tailor becomes midwife, she can not deliver. The same has happened in the case of Pakistan’s premier revenue collection body, FBR headed not by a taxman but someone of the class experienced in maintenance of public order and flirting with politicians of (fake) degrees class. It has fallen short of its target thus widening the gap between the receipts and expenditures and widening further the budgetary deficit which has become the hall-mark of Pakistan’s economy. It was expected that during the last two days of the financial year, FBR might put up a good show but alas, it never happened. Express Tribune has reported that the government has collected Rs1.31 trillion in taxes in fiscal year 2010, falling short of the Rs1.38 trillion target mainly because of fixing unrealistic targets. The target was missed by Rs67 billion.
Provisional statistics showed that FBR generated Rs791 billion through indirect taxes. The official said that the government collected Rs511 billion on account of sales tax compared to the revised target of Rs540 billion.
Independent experts said that the government deliberately overstates the revenues and understates expenditures in order to show the budget deficit on the lower side. The collection on account of customs duty was Rs161 billion against the target of Rs165 billion. The FBR netted Rs119 billion in federal excise duty against the target of Rs134.4 billion.
Collection of direct taxes stood at Rs522 billion against the target of Rs540 billion, which is 3.4 per cent less than the target. In June, the FBR bagged Rs180 billion in taxes against the target of Rs191 billion.
The Rs67 billion shortfall will result in a budget deficit of over 0.5 per cent of Gross Domestic Product, taking the overall deficit to above 5.5 per cent. The revised budget deficit target, which was agreed with the International Monetary Fund, was 5.1 per cent. Earlier, the government had increased the target by 0.2 per cent from 4.9 per cent due to less-than-expected inflows from the Friends of Democratic Pakistan forum and higher security expenditures.
“Tax authorities could not achieve the target because of failure to improve administration, cut in public sector spending and 50 per cent tax relief on sugar,” said FBR Chairman recently. He has failed to understand that failure to achieve the tax collection target has nothing to do with government spending and as for the relief on sugar, it was not never meant for common man.
Ahmad said the FBR had targeted to save Rs50 billion in taxes by improving tax administration but that could not be done. Besides, over Rs200 billion cut in the Public Sector Development Program resulted in a shortfall of Rs15 billion in targeted tax collection.
“A 50 per cent reduction in sales tax on sale of sugar caused a loss of Rs22 billion and the relief package to businessmen and traders of Khyber-Pakhtunkhwa will cost the kitty Rs5 billion,” he added.
Experts are rightly skeptical about the new fiscal year’s estimates for revenues and expenditures. For fiscal 2011, the government has given tax collection target of Rs1.67 trillion to the FBR, which according to experts is again unrealistic keeping in view the current economic conditions.
The Revenue Advisory Council (RAC), a body of independent experts working in collaboration with FBR, has estimated that this year tax collection would not exceed Rs1.65 trillion.