Direct taxes emerge as major revenue spinner

Direct taxes have emerged as major revenue spinners with over 48 percent growth during 2006-07, enabling the Central Board of Revenue (CBR) to maintain 17.5 percent growth momentum during the outgoing fiscal year. Sources told Business Recorder on Friday that the CBR would release provisional revenue collection figures for 2006-07 on June 30.
So far, the Board has witnessed a growth of 17.5 percent in overall revenue collection, which has been termed as satisfactory. The picture would be clearer on compilation of figures of June and it is expected that over 18 percent growth would be achieved.
Sources said that the Board is satisfied with the overall revenue collection trend witnessed during the current financial year.
The direct taxes collection was over Rs 320 billion during 2006-07 against Rs 220 billion of last fiscal year. This extraordinary figure of direct taxes of Rs 320 billion is provisional collection up to June 28, 2007 and it would further increase.
Direct taxes collection would help the CBR in achieving the overall revenue target of Rs 835 billion even if the customs duty and sales tax collection would not be up to the mark. During last many months, there had been a negative growth in customs duty collection. Similarly, the Board is making efforts to improve sales tax collection at the import stage.
On the sales tax side, officials insisted that no refunds had been blocked for increasing GST collection for meeting the target. Sources said that the amazing growth in direct taxes would save the CBR from any major revenue shortfall by the end of the current year.
The Board had collected Rs 722.25 billion in July-May 2006-07 against Rs 610.6 billion in the corresponding period of last fiscal year, indicating a growth of 18.3 percent.
Direct taxes collection was Rs 272 billion during eleven months of 2006-07 against Rs 181.9 billion, showing an increase of 49.9 percent. Indirect taxes collection was Rs 449.55 billion during the period under review against Rs 428.62 billion in the same period of 2005-06, reflecting an increase of 4.9 percent.
According to CBR, overall achievement in collection had been made possible due to an extraordinary outturn by direct taxes. A strong growth of 55.7 percent has been registered at the end of third quarter of current fiscal year. The addition of Rs 85 billion, in absolute terms, further confirmed the buoyant nature of direct taxes.
One of the important features of direct tax collection has been the realisation of double-digit growth since the start of the 2006-07. The first quarter registered an emphatic growth of 43.4 percent in gross and 38 percent in net collection. This was on account of improved voluntary compliance by the taxpayers. The net collection from this source increased to Rs 37.2 billion as compared to Rs 20.3 billion in the corresponding period of last year, indicating a growth of 83.1 percent.
The second quarter also maintained continuity in healthy tax receipts. In fact, a remarkable growth of 74.9 percent in gross and 89.3 percent in net terms was recorded. The source of this growth was once again improved voluntary tax compliance of payments with returns and advance taxes. The third quarter growth mostly ''originates'' from withholding taxes. During third quarter, overall net direct taxes collection has increased to Rs 237.8 billion as against Rs 152.7 billion in the corresponding period of last year.
Another encouraging aspect has been the change in the tax mix. CBR had always invited criticism for having low tax contribution of direct taxes vis-à-vis other tax receipts. With remarkable performance, direct taxes have become the leading source of revenues for the CBR, the report added.