FBR sets Rs 477 billion target for second quarter

The Federal Board of Revenue (FBR) has fixed nearly Rs 477.1 billion as revenue collection target for the second quarter (October-December) of 2011-12 under the plan to meet annual target of Rs 1952 billion for 2011-12. Sources told Business Recorder here on Wednesday that the tax estimates have been worked out on the basis of current pace of revenue collection.
According to FBR''s tax estimates, the revenue estimates for October 2011 has been set at Rs 133.1 billion. During the first quarter of 2011-12, the FBR collected Rs 373.819 billion against target of Rs 363 billion, reflecting an increase of Rs 10.819 billion. The achievement of the target during first quarter indicates that the FBR would be able to meet the ambitious revenue collection target of Rs 1952 billion for 2011-12.
Sources said that the FBR has to take major enforcement/ administrative measures and improve compliance with expansion of the tax base to reach the figure of Rs 477.1 billion during the second quarter of 2011-12. The FBR is already focusing on areas to enforce filing of sales tax and income tax returns by non-filers, recovery of tax arrears and audit of corporate sector, Association of Persons (AOPs) and individuals. Beside national documentation strategy, the FBR is trying to recover illegal input tax adjustments from the claimants and monitoring the withholding tax regime.
When contacted, a tax expert said that the withholding taxes contribute around 60 percent in the overall direct taxes collection, reflecting FBR''s heavy reliance on the indirect taxation during 2011-12. The major chunk of withholding taxes comes from contracts, imports, salary, telephone, export, bank interest, electricity, dividends and cash withdrawal. The withholding tax collection from contracts remained as the top revenue generating source of withholding taxes. The 60 percent collection from withholding taxes is also a form of indirect tax collection. At the import/export stages, the withholding tax is deducted at source. This heavy reliance on indirect taxation has a direct negative impact on the masses including salaried class.
The FBR''s latest data shows that the sales tax collection was Rs 180.415 billion in July-September (2011-12) against Rs 133.702 billion in same period of last fiscal year, reflecting an increase of 34.9 percent. Sales tax at import stage was Rs 104.124 billion first quarter of current against Rs 63.957 billion, showing an increase of 62.8 percent.
Sales tax collection on domestic consumption and local supplies showed a growth of 9.4 percent. The sales tax collection (domestic) was Rs 76.291 billion in first quarter against Rs 69.745 billion. The increase in the sales tax collection at the import stage as well as domestic consumption showed substantial increase during first quarter of 2011-12 despite the fact that the standard rate of sales tax has been reduced from 17 to 16 percent. On the other hand, the Federal Excise Duty (FED) collection also witnessed a growth of Rs 6.7 percent during the period under review. The growth in sales tax and the FED collection during this period shows that the tax machinery is still heavily relaying on indirect taxes, particularly sales tax, to meet the targets, the expert added.
Another analyst said that the rich class seemed to be declaring foreign remittances and agricultural income as source of investment in their income tax returns. The FBR is already verifying cases where source of investment has been explained as foreign remittances and agricultural income to check authenticity of declarations made by rich people in their income tax returns. The FBR had directed the field formations to report all such cases where source of investment has been declared as foreign remittances or agricultural income through verification from the concerned provincial departments or banks. In cases of foreign remittances, the tax department would verify the genuineness of the foreign remittances certificates from the banks.
Under the Income Tax Ordinance 2001, the tax department is not empowered to ask source of investment where property has been purchased from foreign remittances. The tax exemption has been granted to foreign remittances under section 111 of the Income Tax Ordinance 2001. The investment made through foreign remittances cannot be probed into by the tax department. The amount may have been utilised for construction/purchase of luxurious bungalows in Pakistan.