Mammoth task: FBR needs to collect Rs661bn more to meet tax target
The Federal Board of Revenue (FBR) has so far provisionally collected Rs3.27 trillion in taxes, leaving it with a gigantic task of generating Rs661 billion in the last month of current fiscal year to hit the revised annual target.
From July through May, the FBR recorded a provisional net revenue collection of Rs3.274 trillion, said officials in the FBR on Thursday.
The collection was Rs414 billion or 14.4% higher than the comparative period of last fiscal year as the pace of increase in revenues further slowed down. In the first 11 months of the last fiscal year, the FBR had collected Rs2.86 trillion in taxes.Parliament had approved Rs4.013-trillion tax collection target for the outgoing fiscal year. Due to continuous shortfall, the government lowered the target by Rs78 billion to Rs3.935 trillion last month.
But the results of first 11 months indicate that even the revised target is unrealistic. The FBR needs to collect another Rs661 billion to hit the target.
In June last year, the FBR had collected Rs518.3 billion and the authorities would need 28% growth this year, which is next to impossible.
The FBR officials said the authorities may collect around Rs3.8 trillion by the end of current fiscal year, which means they will miss the original target by Rs213 billion. This will widen the budget deficit by the same amount. The government had recorded Rs1.481-trillion budget deficit for the July-March period, which was equal to 4.3% of gross domestic product (GDP).
Provisional results for May coincided with the end of term of the PML-N government. When the government came to power in June 2013, the FBR’s net collection was Rs1.946 trillion, which in five years almost doubled.
However, the increase in collection entirely came on the back of almost Rs1.4 trillion in new taxes. The increase in revenue collection in five years was below the nominal increase in the size of economy, indicating the government could not stop revenue leakages because of theft by taxpayers and corruption in the tax machinery.
The chances of Rs661-billion collection in a single month are not bright because the FBR has already taken advances from state-owned enterprises and commercial banks to meet its quarterly targets, said officials in the tax machinery.
In certain cases, the FBR has taken advance income tax for the July-September quarter of fiscal year 2018-19, which is yet to begin.
In the 11-month period, the FBR has released tax refunds of Rs100 billion including Rs31.3 billion released on Thursday.
According to some estimates, the FBR has so far withheld around Rs320 billion worth of refunds of the taxpayers. But the FBR officially admits only about Rs100 billion in sales tax refunds. It does not acknowledge the income tax refunds.
In case of any shake-up at the top level in the FBR, the tax collection may further slowdown in June. There are also chances that at least one senior FBR member may be replaced, said the officials.
Bilateral ties: Tajikistan eager to ink deal on tourism cooperation
Tajikistan wants to sign an agreement with Pakistan on bilateral cooperation in tourism with incentives for tourists and companies to give a big push to the sector.
Speaking at a seminar on “Tajikistan – The Land of Opportunities for Tourism Industry of Pakistan”, Tajikistan Ambassador Sherali Jononov said the two countries were exploring opportunities for cooperation in energy, education, culture and defence sectors. But tourism was a missing subject that should be explored.
“Tourism is a big industry in the world and some countries in the European Union, Asia and the Gulf are depending on it,” he pointed out, adding the industry contributed to the gross domestic product of some countries and generated revenue for the federal budget.
Jononov said the question “is how we can strengthen people-to-people contact with Pakistan that is the hub of tourists between south and central Asian states.”
The president of Tajikistan had announced a strategy to develop the tourism industry, he revealed, adding Tajikistan would host a meeting of the working group on tourism in July in Dushanbe where leading tourist companies of Pakistan would be present to find ways to promote bilateral relations.
“Pakistan’s Civil Aviation Authority was approached by Tajik Air to resume direct flights between the two countries, but no response has been received yet,” he disclosed.
Speaking on the occasion, Tajikistan’s Committee on Tourism Development Deputy Chairman Shirin Amonzoda said Tajikistan President Emomali Rahmon had declared 2018 as the year of tourism development.
She said Tajikistan’s president had also announced a number of incentives for tourists and the industry which included exemption from tax on profit for first five years, exemption from value added tax and customs duty and 50% reduction in customs duty on new cars for tourists and tourist companies.
Pakistan and Tajikistan had signed an agreement in 2004 on tourism, which was enforced in 2008, she recalled and added that Tajikistan wanted more tourists from Pakistan and desired to sign a new agreement keeping in view the fresh incentives.
She said only 110 tourists from Pakistan visited Tajikistan in the first three months of 2018.
A delegation from Pakistan will visit Tajikistan soon to explore opportunities for the tourism industry.
Neelum-Jhelum’s second unit starts energy generation
Following completion of mechanical test run, the second unit of Neelum-Jhelum hydroelectric power project was successfully synchronised on Wednesday with the national grid.
The unit has generated up to 185 megawatts of electricity on a trial basis and will gradually achieve its maximum generation capacity of 242.25MW in due course of time. The second unit will also undergo reliability test and go through the reliability period in accordance with contractual obligations.
Third unit of the project, which has been in the 30-day reliability period since May 18, is also contributing 242.25MW of electricity at full capacity to the national grid.
The hydroelectric power project has so far injected about 90 million units of electricity to the system, which is equal to a revenue of Rs1 billion.
The 969MW Neelum-Jhelum power project has four generating units, each of them having generation capacity of 242.25MW. Overall, the project is scheduled to be completed by July this year.
Last week, the government approved the Neelum-Jhelum project at a final cost of Rs506.8 billion, but turned down requests for fixing responsibility for mismanagement and alleged corruption by some bureaucrats and retired generals.
While approving fourth revision in the project’s cost, the Executive Committee of National Economic Council (Ecnec) set aside corruption and mismanagement allegations. The project had been initially approved at a cost of Rs15.2 billion in 1989.
IT policy aimed at bridging digital divide: Punjab
The Punjab’s IT Policy 2018, based on five pillars including support to the industry, bridging digital divide, e-governance, citizen-centric services and entrepreneurship, was approved by the provincial cabinet in its last meeting.
The policy is focused on bridging the digital divide across gender, regions and economic classes, achieving affordable access for all and positioning Punjab as the IT research and development and innovation hub of Pakistan.
With this approval, Punjab has now become the first province to launch an IT policy. Highlighting salient features of the policy, Information Technology University Punjab founding vice chancellor Dr Umar Saif said the policy document consolidated all the initiatives taken in the sector and set a future roadmap for making Punjab the hub of information technology.
OLX invests $89m in carfirst to combine network for auto sales
OLX has announced an investment of $89 million in CarFirst, an ancillary of Berlin-based start-up Frontier Car Group, in a bid to utilise each other’s platform to gain an added advantage in the respective secondhand auto markets.
The global deal was signed about a week ago, but in Pakistan both companies announced the investment on Wednesday, though they did not give any exact investment figure that Pakistan’s secondhand car market would get out of the deal.
OLX has its presence in 40 countries and is an online classified platform whereas CarFirst is a relatively new, offline platform, having presence in only six countries.
“Both companies will work together to provide our users a comprehensive offline and online auto experience in the sector,” said OLX Pakistan Chief Executive Officer Bilal Bajwa at a press conference.
The combination of OLX’s online auto inventory and CarFirst’s car trading services is expected to provide buyers, sellers and dealers with industry-leading products and services.
“Car sellers will be able to sell their cars through either the OLX’s classified platform or at CarFirst’s purchase centres. This will bring the world of online car trading together with an on-ground network of value-added car services,” said a statement issued on Thursday.
More outages feared as circular debt grows
The Islamabad Chamber of Commerce and Industry (ICCI) has voiced concern over the rising circular debt that has reached Rs573 billion and is expected to lead to more load-shedding and affect production activities.
It urged the government to take urgent measures to clear the debt in order to save the economy from its damaging consequences.
In a statement, ICCI President Sheikh Amir Waheed recalled that the circular debt had exceeded Rs500 billion in May 2013 and the current government, after coming to power, cleared Rs480 billion worth of debt in June that year, after which it was hoped that the issue would not rear its head again.
However, contrary to expectations, the circular debt again crossed Rs500 billion in May 2018, which showed that no concrete measures had been taken to resolve the critical issue. He said Pakistan was producing about 9,000 megawatts of electricity with oil as fuel whereas receivables of Pakistan State Oil (PSO) had increased to over Rs300 billion.
He was afraid that if PSO’s payments were not cleared, it would not be in a position to ensure oil supply due to which oil-based electricity would disappear from the system, creating serious power crisis in the country.
ICCI Senior Vice President Muhammad Naveed Malik and Vice President Nisar Mirza pointed out that as per figures of the Pakistan Electric Power Company, there were a total of 8,631 feeders in the country, of which a majority were facing 10% losses while others were enduring 80% losses.
NAB to probe Rs33b benefit taken by cigarette firms
In a major development, the National Accountability Bureau (NAB) has initiated probe into Rs33 billion worth of benefits achieved by cigarette manufacturing companies with a change in tax structure.
The Public Accounts Committee (PAC), in its meeting held on May 23, had also recommended a Supreme Court-led investigation on the basis of a special report prepared by the Auditor General of Pakistan on the causes of decline in tax collection from the tobacco sector.
After the introduction of a third tier in the tax structure in May 2017 by the government, major industry players shifted their famous brands to the lowest tax slab and sold cigarettes with 50% reduction in federal excise duty, which enhanced their sales, but government revenues plunged, according to the audit report.
Against the previous two-tier structure, the Federal Board of Revenue (FBR) introduced a new tier where the federal excise duty was 50% lower than the lowest previous rate. The FBR did not place restrictions on shifting from the second highest slab to the lowest one that gave Rs32.9-billion benefits to cigarette manufacturers, according to the report.
“We have already taken up the matter and initial investigation has started against cigarette manufacturers,” NAB Rawalpindi spokesperson Muhammad Bilal told.
He said NAB would take two months to verify the record and around four months in investigation under a set procedure.
When asked whether the special report of the auditor general would help the investigators, he said it might be helpful but he was not sure whether the investigators had received the report or not.
Pakistan has a large number of tobacco users. About 11.6% of the population or 24 million people of 15 years and above are smokers.
The World Health Organisation (WHO) and other world bodies recommend that 70% of the price of cigarettes should constitute federal excise duty in order to discourage smoking.