The PTI Government showed lack of political will to reduce exemptions, concessions, waivers and immunities to the State Oligarchy. Total tax expenditure was of Rs. 1.5 trillion in the just ended FY 2019-2020 as per own admission of FBR in Annex-II appended to Economic Survey 2019-20 [detail in Analysing ‘tax expenditure’, Business Recorder, June 26, 2020]. In fact, more exemptions and benefits have been given to the influential, whereas proudly claiming “no new tax” levied showing total apathy towards the weaker sections of society and small and medium enterprises (SMEs) facing the unbearable economic toll of Covid-19 outbreak/lockdown by reducing the incidence of exorbitant sales tax, withholding taxes and high cost of utilities and other oppressive levies like 12.5% advance income tax from all mobile subscribers. The latest data available on the website of Pakistan Telecommunication Authority (PTA) shows the total cellular subscribers as on December 31, 2020, 176 million, out of which 91 million are 3G/4G subscribers, 3 million basic telephony users and 93 million broadband subscribers. In the presence of such confiscatory taxes, Parliament gives tax amnesties, immunities and waivers to the rich, tax evaders and looters of national wealth or Presidential Ordinances of extending tax benefits are issued for the mighty developers and constructors. This practice should end now when all the businesses, big or small, are struggling to survive the disastrous consequences of second deadly wave of coronavirus endemic.
The Government of the Pakistan Tehreek-e-Insaf (PTI) for the current fiscal year (FY) 2020-21 fixed a target of Rs. 4963 billion for FBR, amid continuous economic toll of Covid-19 endemic. Even according to then Adviser to Prime Minister on Finance and Revenue, Dr. Abdul Hafeez Shaikh (now Minister for six months for these portfolios), “it is not achievable”! In a statement, he “advised the provinces not to make their budgets on the basis of proposed Rs. 4.963 trillion tax collection target fixed for FBR for fiscal year 2020-21” and added: “The provinces should make their budgets while keeping in mind the Federal Board of Revenue’s past performance and difference between performance, projections and reality”.
The Annual Budget Statement containing estimated receipts and expenditure laid before the National Assembly of Pakistan for FY 2020-21 in terms of Article 80(1) of the Constitution gives revised estimate of FBR’s collection for the FY 2019-20 at Rs. 3908 billion against the original target of Rs. 5555 billion. Prior to Covid-19 outbreak, FBR was far behind the revised target of Rs. 5238 billion after first review of the International Monetary Fund [IMF] under $6 billion Extended Fund Facility (EFF) programme. It was later revised to Rs. 4803 billion on the eve of incomplete second IMF review, held prior to Covid-19 pandemic, and after coronavirus outbreak, finally reduced to Rs. 3908 billion.
In Year Book for 2019-20 FBR exceeded the third-time revised target of Rs. 3908 billion by Rs. 88.7 billion, collecting a net amount of Rs. 3997 billion—direct taxes (1523 billion), sales tax (Rs. 1597 billion), Federal Excise (250 billion) and Customs: 626 billion). The refunds paid were: direct taxes (68.6 billion), sales tax (92.6 billion), federal excise (nil) and customs (12.2 billion). FBR officials on September 2, 2020, before the National Assembly Standing Committee on Finance, confessed that actual liability of income tax and sales tax refunds as on June 30, 2020 was Rs. 710 billion (sales tax Rs. 142 billion and income tax Rs. 568 billion). The international Monetary Fund (IMF) after its first review seeing that FBR was far behind the original target of Rs. 5555 billion, agreed to revise it to Rs. 5238 billion, then to Rs. 4803 billion on the eve of incomplete second review, held prior to Covid-19 endemic, and after coronavirus outbreak, finally to Rs. 3908 billion. If the admitted refunds payable are deducted from the total tax collection of FBR for fiscal year 2019-20, the net figure comes to Rs. 3287 billion or just 7.7% of GDP.
The blame for unpaid refunds cannot be attributed entirely to the coalition government of Pakistan Tehreek-e-Insaf (PTI). In FY 2019-20, FBR paid total refunds of Rs. 173 billion as against the previous year’s figure of 122 billion. An amount of Rs. 70 billion was paid in respect of long-outstanding refunds through technical supplementary grant (TSG). The government of Pakistan Muslim League (Nawaz) [PMLN] blocked/consumed the bulk of these refunds. This confirms showing of inflated figures by PMLN. Interestingly, this non-disclosure took place when Pakistan was under US$ 6.4 billion Extended Fund Facility (EFF) programme of IMF and they never detected it, rather appreciated the then Finance Minister, Ishaq Dar, now a fugitive, of showing remarkable growth in FBR’s collection. The IMF gave 13 waivers to PMLN since the signing of programme in September 2013 and ending in August 2016 with IMF failing or ignoring over-reporting of FBR’s collection by blocking bona fide refunds and taking advances of billions. It is heartening to know that the present team of FBR is not resorting to such tactics.
According to a Press release of FBR issued on January 10, 2021:
“Prime Minister Imran Khan was told Sunday that tax receipts had surpassed Rs 2205 billion during first six months of current fiscal, manifesting the fruition of government’s taxation reforms. Chairing a meeting to review the tax reforms, the Prime Minister was briefed that owing to tax reforms, a growth in the number of taxpayers had been witnessed. Federal Minister Abdul Hafeez Shaikh, Shibli Faraz and Hammad Azhar, Advisor to PM Dr Ishrat Hussain, Special Assistant on Revenue Dr Waqar Masood, Chairman of Federal Board of Revenue Javed Ghani and relevant senior officers attended the meeting, a PM Office press release said.
It was told that the tax collection was being automated and taxpayers were being given incentives. The automation of the taxation system would enhance transparency and reduce corruption and tax evasion. The meeting was told that tax form had been made far easier for the small and medium enterprises by reducing its pages from five to one and entries from 200 to just 24. The Prime Minister was told that owing to the introduction of direct link between FBR’s system and company through Point of Sale (POS) System, the receipt of Sales Tax had also increased.
The Prime Minister appreciated the Federal Ministers, SAPM on Revenue and FBR Chairman for bringing about taxation reforms. He viewed that the taxpayers were in fact the benefactors for the country who deserved applause. Moreover, he also called for measures to introduce measures for encouragement of the taxpayers.
Earlier in a Press release issued on the first day of 2021, FBR claimed:
“Federal Board of Revenue (FBR) has released the provisional revenue collection figures for the first six months of current year. According to the provisional information, FBR has collected a net revenue of Rs.2204 billion, which is 99.7% of its six-monthly target of Rs.2210 for the current Fiscal Year from July to December and which showed a growth of 5% over Rs. 2101 billion which was collected during the same period last year. Income Tax collection for July to December stood at Rs. 816 billion. Similarly, collection of Sales Tax, Federal Excise Duty, Customs Duty remained at Rs. 915 billion, Rs. 127 billion and Rs. 336 billion respectively. Moreover, an additional Rs.10 billion has been collected from book adjustment. It is expected that revenue to be collected from book adjustment will increase in coming days.
For the month of December only, the total collected revenue stood at Rs. 508 billion, which was 97.7% of the target of Rs.520 billion and showed a growth of 8.3% against 469 billion collected in last December. There is an increase of Rs. 39 billion in the revenue collection of December 2019. This is the highest monthly growth during Jul-Dec period.
In the first six months of current Fiscal Year, refunds to the tune of Rs.102 billion have been issued compared to Rs.53 billion for the same period the last year. This represents an increase of 90 percent in the issuance of refunds. Moreover, under the Prime Minister’s Corona Relief Package, refunds of Rs. 42 billion have also been issued this year. Despite excessive issuance of refunds this year, FBR has managed to collect significantly more revenue in comparison to last year when COVID had not disrupted economic life. Increased refunds have greatly helped boost the economic activity in the country. FBR’s appreciable performance demonstrates that despite the second wave of COVID, government policies have insulated the economy which is showing growing signs of economic revival across the broad-spectrum business activities.
During the first six months of current Fiscal Year, smuggled goods worth Rs.30 billion have been seized as compared to seizures of Rs. 22 billion during the corresponding months of 2019.
After many years, FBR has restored the sanctity of last date of filing of income tax return. This has been welcomed by taxpayers who have filed 2.3 million returns till 31st December compared to 2.17 million last year. Income Tax paid during filing of returns stood at Rs. 43.5 billion compared to only Rs.28 billion deposited last. This shows an increased in tax deposit with returns of 55%.
FBR is fully geared towards automation, e-audit, and simplification of procedures, e-payment of duty draw back so as to add to Ease of Doing Business (EoDB). FBR has launched a single page simplified Income Tax Return for SME manufacturers. FBR has upgraded Iris system for issuing SMS and e-mails whenever any notice is issued or any assignment is created by Tax Officer. FBR has launched a system Maloomat-TaxRay wherein taxpayers’ can access all information available with the FBR by logging through a secure mechanism. For further facilitation, this feature has been launched in mobile app, Tax Assan, so that taxpayers’ can easily access all such information.
FBR has established special committees to urgently resolve the complaints of the taxpayers. Now, the taxpayers’ can file complaints through Helpline, Email, Complaint Portal and registered post”.
(To be continued tomorrow)
(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS))
Copyright Business Recorder, 2021