ISLAMABAD: The Federal Board of Revenue (FBR)'s policy measures of Rs637.4 billion taken through the Finance Act, 2019, failed to generate additional revenue due to external factors beyond the control of the FBR.
The FBR's report on performance of 2019-2020, issued on Monday, revealed that in fact, the FY 2019-2020, because of the Covid-19, had been a very difficult year for the economy, and so for the FBR revenues.
At time of allocation of target to the FBR, it was estimated that positive impact of Rs637.4 billion would be witnessed in Financial Year 2019-2020 with respect to policy measures introduced through the Finance Bill 2019-2020.
However, due to factors not foreseen at the time of target allocation to the FBR, in certain areas, some external factors beyond the control of the FBR have occurred, thus, resulting in lesser than the expected collection.
More than 40 percent of the FBR revenue depends on the national imports, thus, any problems in imports would hit the international trade taxes accordingly. During FY 2019-2020, compression in imports has been around six percent, consequently affecting the import taxes in the following manner: Customs duties and FED at import stage has been affected and its collection declined by nine percent and 22.4 percent respectively as compared to previous fiscal year; withholding taxes at import stage fell by 10 percent, and sales tax collection at import stage grew by just 8.2 percent.
Due to less consumption of petroleum products, domestic sales tax collected from oil marketing companies has reduced considerably. The decline in production and sales as well as the exchange rate increase affected the collection from auto and auto parts sector.
Overall economic recession has adversely affected the FBR's tax collection. Large Scale Manufacturing sector has declined, resulting in lesser payment of taxes.
The growth rate of national economy expected at the time of budget allocation could not be materialised due to multiple macroeconomic reasons, the FBR added.
Copyright Business Recorder, 2020