HOW can the Central Board of Revenue (CBR) raise Rs202 billion as tax revenues during the last quarter of this financial year ending June 30, after its chairman Abdullah Yousaf has declared that 70 to 80 per cent of the cases filed against the income tax payers are bogus?
A total of Rs690 billion is targeted for the year of which Rs488 billion has been collected during nine months. And currently the tax revenue is running ahead of the target by 2.47 per cent.
Of course, the Rs2.2 billion to be collected in the last quarter is far higher than the average quarterly collection, but that has been the way every last quarter and the collection in the last month of the year, when the income tax declarations are made by the tax payers and final payment made is far more than the collection of the earlier months.
Two contrary trends are prevailing in the country today. An increase in economic activities following the sharp rise in personal loans from banks is yielding larger taxes, particularly the sales tax-an increase of 22.4 per cent. On the other side, the frequent hartals and strikes are reducing the sales and tax collection.
Which trend will have the upper hand by the end of September remains to be seen. But it is the first time that the CBR chairman has candidly declared that 70 per cent of the cases filed against income tax payers are bogus and so officers have to be cautious while filing new cases against income tax officers without positive proof. The income tax payers on their part feel encouraged to resist all unfair and illegal demands on the part of the income tax officers.
Mr. Abdullah Yousaf has been candid in admitting the proliferation of bogus cases, as he is not a career taxation officer, but an outsider with an approach to development of trade and industry and economic development.
As a whole, the fiscal performance is going down. In terms of tax-GDP ratio, it reached the lowest point last year when it touched 10.1 per cent from 11 per cent the year before. And that is upsetting the top officials of the finance ministry who are lectured on the subject by the World Bank and IMF officials. They would like to see the tax-GDP ratio of at least 12 per cent reflecting the new higher economic growth.
In fact, the tax-GDP ratio has gone down because of the record economic growth of 8.4 per cent achieved last year. As the GDP growth went up the tax ratio went down as much of the growth was in the non-tax paying areas or non-tax collecting areas. It was prosperity without a matching tax performance.
Now the Secretary General, ministry of finance, Naveed Ahsan and chairman of the CBR have vowed at different pre-budget seminars in Lahore to bring down the gap and make the tax-GDP ratio respectable.
Earlier it was said the tax revenue next year would be targeted at Rs900 billion against the current year’s Rs690 billion which may in fact be exceeded by Rs10 to Rs20 billion. Naveed Ahsan says the banks were paying an income tax of 66 per cent and business 55 per cent. All that was being brought down to a uniform rate of 35 per cent from the next budget so that Pakistani businessmen can compete with other countries in the export market effectively. After that the government would deal with the tax delinquents inflexibly, says Abdullah Yousaf.
The government is also proposing to set up a business support fund to share the cost of production with businessmen under the programme. The government would bring new services to the businessmen. Further key details are lacking.
When Naveed Ahsan talks of the government considering increasing net taxes, he appears willing to levy new taxes for which there is plenty of scope, like on the stock exchange and the real estate, but Abdullah Yousaf is clearly for better tax collection for which he sees plenty of scope. But the end result both seek is the same, larger taxes.
With the private sector bank credit running up to a record Rs340 billion in the first nine months of this financial year-not all consumer banking- there is plenty of scope for larger tax collection, only the taxation officers have to be diligent and honest and be ready to spread their net wide.
In fact, the government has no other option if it wants to reduce inflation and borrow less from the banks and try to live within its means as far as possible. Such diligent taxation can also improve the balance of payments which has now a deficit of $3.688 billion compared to $1081 billion deficit in the same period last year.
The government’s expenditure is likely to go far higher in the new budget as Pakistan is to buy 98 high tech aircrafts from USA and China. The government is also to come up with a new pension scheme and allocation for poverty reduction is to be increased distinctly from Rs375 billion this year. Money has to be found for all these new avenues of expenditure.
Along with such essential expenditure, there is a good deal of waste as well. The foreign tours of our rulers and officials in six months cost $701 million, which means it, will $1400 million for the whole year. So vigorous efforts have to be made to mobilize more revenues: to plug leakages and improve the tax-GDP ratio, which cannot go down as the growth, rate goes up.
HOW can the Central Board of Revenue (CBR) raise Rs202 billion as tax revenues during the last quarter of this financial year ending June 30, after its chairman Abdullah Yousaf has declared that 70 to 80 per cent of the cases filed against the income tax payers are bogus?
