There is a discrepancy of Rs 217.4 billion between the projected revenue generation from additional measures as revealed by the Federal Board Revenue and the International Monetary Fund staff level report. A careful analysis by Business Recorder revealed that the FBR enumerated additional revenue measures of Rs 516 billion while the IMF staff report indicated Rs 733.471 billion. Revenue from mobile phones (Rs 70 to Rs 80 billion is not shown as an additional revenue measure by the FBR as the stay order was vacated on 25 April 2019 however the IMF has included it as a new tax measure.
When contacted, a senior FBR official said that the revenue impact of petroleum products levy and 17 percent sales tax on petroleum products was not incorporated/included in the Rs 516 billion revenue measures taken in budget (2019-20).
The IMF staff level report indicates that tax policy measures would yield an additional Rs 733.471 billion in 2019-20 with: (i) sales tax estimated to yield Rs 222.776 billion; (ii) income tax Rs 324,982; (iii) Federal Excise Duty (FED) Rs 90 billion; (v) customs duty Rs 60 billion; and (vi) what was not estimated in the budget but has been revealed in the staff report additional revenue from revenue administration measure would generate Rs 35.60 billion in the current year.
During the technical briefing on the Finance Bill 2019 on June 11, Federal Board of Revenue (FBR) Chairman and Members stated that FBR had taken additional taxation measures of Rs 516 billion for the current year with the following estimates that deviate from what has been claimed in the staff report: (i) sales tax measures at Rs 200 billion (Rs 22.76 billion less than estimated by the staff report); (ii) income tax measures of Rs 200 billion (124.98 billion less than projected by the FBR); (iii) FED measures Rs 70 billion (Rs 20 billion less than revealed in the IMF staff report), (iv) customs duty measures of Rs 30 billion (Rs 30 billion less than revealed in the staff report).
The administrative measures for 2019-20 include (i) implementation of the Track and Trace system for tobacco products (already initiated under SRO.250(I)/2019 dated Feb 26, 2019), (ii) automated monitoring of general sales tax (GST) and income at retail (point of sale) applicable under the law
with the textile sector required to integrate with the FBR's online system, (iii) changes in ADCIR mechanism, (iv) separation of audit & adjudication functions, (v) making procedure for prosecution easier, (vi) enabling and strengthening FBR field formations, (vii) cleansing of databases and integration to enable effective data mining, (viii) enabling efficient enforcement through investment in FBR Infrastructure and (ix) process reengineering and taxpayer education and facilitation.
The envisaged administrative measures (iii) to (ix) have been specified in the Finance Act 2019. These measures are ongoing in the FBR. Imposition of Federal Excise Duty (FED) on cigarettes from non-tariff areas (tribal areas) to generate additional revenue of Rs 5-10 billion in 2019-20 revealed in the IMF staff level report is a new tax measure and not part of the Finance Act 2019.
Collection of FED on cigarettes from tribal areas would be extremely challenging as the government has limited resources to check smuggling across our large swathe of porous borders; while the smugglers would have an added incentive as their profits would rise given that the FED on cigarettes has been raised in the budget 2019-20.
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