The Federal Board of Revenue (FBR) has outrightly rejected a major proposal of a FBR Member to request the government to freeze the petroleum prices at current level to check any shortfall in sales tax collection during 2011-12 in case of further decrease in POL prices globally.
Sources told Business Recorder here on Friday that the shortfall in sales tax collection due to decrease in prices of POL products globally was discussed during the last Board-in-Council meeting held on August 11, 2011. One FBR key members proposed that if the government freezes the prices of petroleum products at prevailing level, this might avert any major shortfall in sales tax collection.
He was of the view that there is a decreasing trend in the prices of the POL products internationally, and freezing the prices at the current level would check shortfall in sales tax collection. A major chunk of sales tax at the import stage is coming from POL products and it continues declining as the prices of the POL products internationally would have direct negative impact on the sales tax collection during 2011-12.
Sources said that the FBR Member further proposed that the increase in the rate of customs duty on some items and freezing of POL prices would be instrumental in checking any major shortfall in revenue collection. During 2011-12, the FBR will not get anything from 15 percent income tax surcharge imposed for a three months period. The FBR has also not taken any major revenue generation measure in budget 2011-12.
Responding to the proposal of the FBR Member, tax authorities categorically informed that the FBR must confine its proposal to the taxes. It is not the mandate of the FBR to propose anything like freezing of the POL products prices just to increase sales tax collection.
Such kinds of proposals do not come under the powers and jurisdiction of the FBR and same would not be considered at the Board level. The FBR cannot forward any proposal to the Ministry of Finance for freezing POL products prices as the same does not comes within the scope of the tax policy. Instead of discussing such ideas, the focus of the FBR would be on improving compliance of the withholding agents and documentation of economy.
Tax authorities further informed the Board-in-Council that they are not preparing any federal budget at the level of the council and therefore such proposals for increasing customs duty on different items could not be finalised at the level of the Board-in-Council.