FY12 revenue target: Withdrawal of ST exemptions proved to be highly productive: FBR

SOHAIL SARFRAZ

ISLAMABAD: The Federal Board of Revenue has said the sales tax exemptions withdrawn during March 2011 have proved highly prolific in 2011-12 which would be instrumental in achieving the assigned revenue collection target of Rs 1,952 billion for current fiscal year.

According to the FBR quarterly review issued here on Friday, the FBR has managed to accomplish the target during July-December, 2011 despite unfavourable macroeconomic situation and energy shortage. All the taxes exhibited considerable growth in the collection except federal excise duty (FED) where collection declined due to policy initiatives. The exemption withdrawn in case of sales tax during March 2011 has proved highly prolific in 2011-12 as well. Despite huge task in the second half, it is expected that annual target will be achieved with concerted efforts by the FBR.

The report said the tax revenue generation is linked with the state of economy. The economy of Pakistan was confronted with both external and internal challenges; foremost on the domestic front electricity & gas outages remained a major constraint to the overall growth of the economy. Despite these constraints, it is encouraging to note that economy is showing signs of improvement, to some extent, in the current fiscal year. The growth in large scale manufacturing has improved from negative in first half of 2010-11 to positive in the current fiscal year in 2011-12. Within the commodity producing sector, especially agriculture is doing better and major Kharif crops are likely to achieve their growth targets. Moreover, flood related damages to the cotton crop in Sindh have been more than offset by gains in Punjab. Similarly, foreign remittances improved significantly and inflation has declined in food and non-food sectors. However, the drop in inflow of FDI and risks to macroeconomic stability posed from external sector are major concerns.

According to SBP Second Quarterly Report FY 12, the growth of GDP would be 3% to 4% during current financial year against an annual target of 4.2%. However, a sizeable growth of more than 27% in the tax collection during first half of 2011-12 is the manifestation of FBR concerted efforts. Based on the trend in growth achieved so far, it is hoped that annual revenue target of Rs. 1,952 billion would be met.

The FBR revenue target for the FY: 2011-12 has been fixed at Rs. 1,952 billion at the time of announcement of Federal Budget. FBR has been able to collect Rs. 840.7 billion net revenue during July- December 2011-12 against a target of Rs.839.7 billion despite unfavourable macroeconomic situation and power & gas outages. The collection has registered a growth of 27.1% over collection during the previous year. This achievement has been made despite general economic slowdown, particularly, the slow growth in the manufacturing sector and less tax realization from major sectors like cement, beverages and cigarettes. Keeping in view, the deteriorating economic conditions, this performance is satisfactory to great extent.

The FBR is making best efforts to achieve the annual revenue target of Rs 1,952 billion. However, there will be more pressure in the second half of current fiscal year to collect the remaining balance of Rs.1,111.3 billion which is over 56% of total revenue target, report added.