ISLAMABAD: The revenue collection target of the Federal Board of Revenue (FBR) has been revised downward from budgetary projection of Rs4.9 trillion to Rs4.7 trillion for 2020-21, reflecting a decrease of Rs246 billion.
This was agreed in an agreement reached between the International Monetary Fund (IMF) and the Pakistani authorities on a package of measures to complete second to fifth reviews of the authorities’ reform programme supported by the IMF Extended Fund Facility (EFF).
Senior FBR officials revealed to Business Recorder that the IMF and the government has agreed to downward revise budgetary tax collection target of Rs4,963 billion to Rs4,717 billion for 2020-21, reflecting a decrease of Rs246 billion.
During this week, the Ministry of Finance has officially conveyed to the FBR to scale down the target for 2020-21.
Target of Rs381 billion set for February 2021 was set, based on the budgetary target of Rs4,963 billion. The revenue targets for the remaining months of 2020-21 would be adjusted downwards based on revised target of Rs4,717 billion.
The FBR had proposed to scale down the revenue collection target from Rs4,963 billion to Rs4,550 billion for 2020-21, but it was not agreed to by the IMF, the officials said. Sources said that the FBR’s revenue collection target for 2021-22 has been projected to be over Rs6 trillion. According to the senior officials, the government has agreed to withdraw corporate sector income tax exemptions up to Rs150-200 billion from the Income Tax Ordinance, 2001.
The FBR has reviewed the list of corporate tax exemptions under the relevant schedules of the Income Tax Ordinance 2001.
The government has also assured the IMF that the sales tax exemptions of over Rs100 billion would also be withdrawn.
The exemptions may be withdrawn in the next budget or a Finance Amendment Bill, 2021, to be moved to the Parliament.
Even if the exemptions are being withdrawn before budget (2021-22), the measures would be applicable from next fiscal year.
The FBR will propose to the government to reduce the number of withholding taxes in the next budget.
Moreover, the track and trace system for electronic monitoring of tobacco, sugar, cement, and fertiliser would be made applicable from July 1st, 2021.
The government has also agreed to review the personal income tax (PIT) regime with a focus on increase in the incidence of tax for higher income tax brackets of salaried class and tax credits and deductions.
The FBR has also assured the IMF that the tax authorities would focus on policy measures including harmonisation of sales tax between the federation and the provinces; transformation of sales tax regime into a broad-based VAT; strengthening taxation on real estate and on agricultural turnover or income by provinces, and ensuring equivalent taxation of all sources of income.
Copyright Business Recorder, 2021