ISLAMABAD: The Federal Board of Revenue (FBR) will take measures to generate additional revenue through genuine tax demands/assessments, recovery of arrears, high impact sectoral audits, track and trace at sugar/tobacco sectors to overcome revenue shortfall following decrease in sales tax rates on petrol products in November 2021 and expected import compression.
On Saturday, the Board-in-Council was briefed on the updated position of the revenue collection during first four months of the current fiscal year.
The issue of achievement of revenue collection target for 2021-22 was discussed in detail during the special Board-in-Council meeting of the FBR held under the chairmanship of Dr Muhammad Ashfaq Ahmed, chairman FBR, Saturday.
The FBR Headquarters was opened specially for this Board-in-Council meeting on the weekend.
The Board-in-Council was confident of achieving the assigned revenue collection target of Rs5.8 trillion for 2021-22.
Sources told Business Recorder that the draft of the Tax Laws (Fourth) Amendment) Ordinance has been vetted by the Law Division. If the ordinance is promulgated to withdraw sales tax exemptions, zero-rating and reduced sales tax rates, the estimated revenue impact would be around Rs395 billion during 2021-22.
The rate of sales tax on petrol has been proposed to be reduced from 6.84 percent to 1.43 percent (5.41 percent reduction). The sales tax rate on HSD would be reduced to 3.53 percent or from 10.32 percent to 6.79 percent.
The drastic reduction in sales tax rate has a negative impact on the sales tax collection.
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Presently, the FBR has probably collected over 50 percent of taxes from imports including food items, machinery/equipment and raw materials, which are ultimately consumed in the domestic manufacturing in the country.
However, the import compression may result in less revenue of Rs100-200 billion at the import stage during current fiscal year.
Some of the major initiatives included centralised monitoring and supervision; crackdown on unethical practices; realignment of jurisdiction; establishment of new formations such as Large Tax Office (LTO), Multan and CTO Islamabad; crackdown against smuggling/POL stations; curbing under invoicing; initiation of high impact sectoral audits; automation of refunds through Sales Tax (FASTER+) and Income Tax (CITRO); centralised Post Refund Audit; Alternate Dispute Resolution; Chief Commissioners working as Ombudsperson to resolve taxpayers issues expeditiously and establishment of Pakistan Single Window (PSW).
The FBR would now also focus on recovery of arrears, speedy implementations of the track and trace system at sugar mills, current demand creation, admissible tax demands and speedy disposal of cases pending at the level of judicial fora.
Under the new audit policy, it has been decided to outsource all cases to the third party for audit selected through random balloting or computerised parametric selection procedure.
According to the data, the FBR has collected net revenue of Rs1,841 billion during July-October of current Financial Year 2021-22, which has exceeded the target of Rs1,608 billion by Rs233 billion. This represents a growth of about 36.6 percent over the collection of Rs1,347 billion during the same period last year.
The net collection for the month of October, 2021 realised Rs440 billion, representing an increase of 30.5 percent over Rs337 billion collected in October 2020. These figures would further improve before the after book adjustments have been taken into account.
On the other hand, the gross collections increased from Rs1,413 billion during July-October, 2020 to Rs1,932 billion in current Financial Year, showing an increase of 36.7 percent.
The amount of refunds disbursed was Rs91 billion during July-October 2021 compared to Rs66 billion paid last year, showing an increase of 37.7percent.
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Board-in-Council also discussed the new policy on the transfers and posting of the Inland Revenue Service.
Under the new policy, it would be ensured that the officers and officials of the Inland Revenue should be timely transferred and posted after completion of their tenure.
This would ensure that the tax officials must not stay very long at a specific position in the field formations.
The officials of the field formations must be transferred to the FBR Headquarters on rotation basis.
Sources said that the first agenda of the autonomy of the FBR was not taken up in the meeting.
The government has assured the FBR to grant operational and financial autonomy to the FBR to rule out the possibility of political interference.
Autonomy to the FBR would ensure availability of necessary funds to the Board for running day-to-day operations, infrastructure development, upgrading offices and procurement of IT equipment etc. The operational and financial autonomy to the FBR would make tax machinery as an efficient, merit-based, service-oriented, and public-friendly organisation.
Moreover, the automation in tax system would bring transparency and reduce the discretionary powers, which had always been a long-term demand of the business community, they added.
Copyright Business Recorder, 2021
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