Elite clan to face more enforcement measures: experts

The Federal Board of Revenue (FBR) would be left with no option but to take a lot of administrative and enforcement measures along with documentation of the elite class for fixation of revenue collection target for 2012-2013, in view of government policy without additional taxation measures/ increase in tax rates during next fiscal.
Tax experts told Business Recorder here on Tuesday that the government has categorically laid down its tax policy for the upcoming federal budget. Prime Minister and top officials of Finance Ministry and FBR have reportedly said that no new tax would be imposed in new budget and existing rates of taxes would not be increased in coming budget (2012-2013). Beside major factors of inflation and GDP growth, now the FBR can only generate revenue with the help of enforcement and administrative measures and broadening the tax base in next fiscal. If the FBR strictly follow the government policy of not introducing any new tax or increase tax rate, the FBR has to focus on enforcement measures and expanding the tax base in 2012-13.
If the government continues with the policy of tariff rationalisation and phasing out of federal excise duty on certain products, it would also be considered as relief measure in the next budget. On the assumption that the Federal Board of Revenue (FBR) may achieve the target of Rs 1952 billion during 2011-2012 and additional taxation measures of around Rs 100 billion in next budget, the revenue collection target could be in vicinity of Rs 2344 billion taking into account other factors like inflation and GDP growth, tax experts opined.
So far, the FBR has shown remarkable growth of 27 percent during July-January 2011-12. The Federal Board of Revenue (FBR) has provisionally collected Rs 1108 billion in first eight months of current fiscal year, which is 27 percent up considering last fiscal year's collection in the corresponding months. Thus, the FBR is currently maintaining momentum of extraordinary growth of 27 percent during ongoing fiscal 2011-2012.
Another important factor is that the taxation measures taken in March 2011 would now become comparable in real terms in the remaining period of 2011-2012. The taxation measures taken in March 2011 included withdrawal of sales tax exemptions on fertilisers, pesticides, plant, machinery and equipment including its parts. In March 2011, the Board has also withdrawn sales tax zero-rating facility on domestic supplies of five leading export sectors. When these taxation measures were introduced in March 2011, the same played an important role in increasing revenue collection growth from March 2011 onwards and growth in revenue collection was visible.
At the same time, as measures were taken in March 2011, its impact cannot be compared with the corresponding period of previous fiscal. The withdrawal of exemptions was done in March 2011 and growth was witnessed due to these measures without making any comparison with the corresponding period of last fiscal, as such comparison cannot be made. The measures taken in March 2011 have been neutralised in March 2012. Hence the corresponding period of March 2011 and March 2012 onwards would now become comparable in real sense, they said.
When contacted, another analyst was of the view that the revenue collection target of the FBR for 2012-2013 could be within the range of Rs 2400 billion and Rs 2500 billion, depending on the final figures of collection during 2011-2012 and possible taxation measures to be taken during upcoming budget (2012-13). This is only possible in case 25 percent growth in revenue has been projected for 2012-13 and the annual target of Rs 1952 billion for 2011-12 would also be surpassed. The inflation rate and GDP growth by the end of current fiscal would also play important role in setting new target for 2012-13. At present the FBR is apparently focused on meeting the revenue collection target of Rs 1952 billion for 2011-2012, which is Rs 364 billion higher than the downward revised target of Rs 1588 billion for 2010-2011.
It is premature to fix revenue collection target at this stage for the next financial year. The target of Rs 1952 billion for 2011-12 was around 25 percent higher than the downward revised target of Rs 1588 billion in 2010-2011. If merely 25 percent growth is taken into account, the target may be in the range of Rs 2400 billion and Rs 2500 billion. However, it all depends on the revenue collection figures for 2011-12, overall economic situation and estimated revenue increase due to administrative and enforcement measures in 2012-13.