The Federal Board of Revenue has developed a new dynamic plan to phase out federal excise duty in three years. The Revenue Division''s Year Book 2010-11 issued by the FBR''s research team of the Strategic Planning, Research and Statistics Wing here on Monday said the special excise duties and most of regulatory duties have been abolished and a plan to phase out FED in three years has been developed.
The FBR is geared to look forward and devise strategic initiatives to generate more revenues in coming years. These included a move towards two main taxes (income tax and sales tax), which is already under way. The report said that the FBR is in the process of developing a fully automated refund processing system to ensure expeditious settlement of refund claims. An initiative for electronic payment is under process and is expected to be completed by end of this year. More than 700,000 potential taxpayers were identified through data matching. The notices have been sent and a provisional assessment is being made. Moreover, the Afghan Transit Trade Agreement (APTTA) has been signed between Pakistan and Afghanistan. Under the agreement it has been made mandatory to submit financial guarantees equivalent to taxes releasable on cross-match of data with Afghan Customs.
The annual report (2010-11) said that the size of Public Sector Development Programme (PSDP) was slashed which adversely affected the collection under WHT on contracts and supplies. It may also be highlighted that the capital value tax (CVT) has been transferred to provinces from 2010-11 under the 18th Amendment whereas substantial amount was collected under CVT last year. Similarly, it was anticipated that an amount of about Rs 5 billion would be collected on account of levy of capital gain tax on stock market. In contrary, negligible amount of less than hundred million has been realised so far. Keeping in view the deteriorated economic conditions and as a result low resource mobilisation, the government introduced reform initiatives effective 15th March 2011 to meet the growing need of the flood affected people and reach the assigned target. These measures includes levy of one time 15% surcharge on income and advance taxes for 3.5 months, increase the rate of special excise duty (SED) both at import and domestic stages from 1% to 2.5%, withdrawal of special regime of assessable price for levy of GST @ 8% on actual value of sugar and removal of SRO based exemptions from fertiliser, pesticides and tractors and elimination of zero-rating from plant, machinery & equipment and also restrict zero rating to registered persons for export of textile, leather, carpet, sports goods and surgical goods. A total of Rs 29.4 billion was realised from these measures during 2010-11.
The FBR has been able to collect net revenue amounting to Rs 1,558 billion at the end of the year; despite 76.3% higher sales tax refunds (Rs 50.8 billion in fiscal: 2011 versus Rs 28.8 billion FY: 2010. The growth in net collection has been 17.4% over the actual realisation of Rs 1,327.4 billion during fiscal: 2009-10.
While analysing federal taxes by its contribution in total receipts, the FBR said that the contribution of direct taxes during July-June, 2010-11 has marginally decreased to 38.7% from 39.6% in previous fiscal year. On the contrary, the share of sales tax on imports has increased to 19.8% from 18.6% during last FY. Major reason for rapid growth in the collection is due to increase in the value of imports during the period under review. The contribution of customs duty and federal excise has been 11.9% and 8.8% respectively, the yearbook added.