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Revenue collection target

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Member (Tax Policy) Jameel Ahmed Bhutto says, "Revenue collection target for first quarter easily achieved which gives a clear signal that year's target would be crossed with out any difficulty."

From SHAMIM AHMED RIZVI, Islamabad
Oct 11 - 17, 1999

Having achieved the revenue target agreed by the IMF for the first quarter of the current fiscal year (1999-2000), the Central Board of Revenue is quite hopeful to exceed the total revenue target of Rs. 356 billion fixed for the fiscal year.

Jameel Ahmed Bhutto, Member (Tax Policy) told this correspondent in an exclusive interview that "This is perhaps for the first time that an ambitious quarterly revenue target of Rs. 71.7 billion has been crossed by touching the figure of Rs. 72.2 billion tentatively calculated upto September 30, 1999."

In view of these results the CBR may not feel uncomfortable if the target is raised further by another 20 billion as the figures of the first quarter do not reflect the recent increase on account of imposition of general sales tax (GST) on petroleum, gas and electricity consumption. GST on petroleum is likely to yield about Rs. 13 billion and gas about Rs 2 billion after necessary adjustments. The effect of GST on electricity is still being worked out.

Jameel Ahmed Bhutto said, "We were keen not to repeat the trend of the last year in which targets had to be revised downward three times — from Rs. 354 billion to Rs. 327 billion, then to Rs. 318 billion and finally to Rs. 308 billion against the actual collection of Rs 308.5 billion.

 

Following chart explains the headwise revisions of target for 1998-99 along with reasons given by the CBR.

Revenue Target 1998-99

Heads Original 1st 2nd 3rd

Target Revision Revision Revision

1. 2. 3. 4. 5.

1. Direct Taxes 123.0 120.0 117.2 112.0

2. Sales Tax 71.5 72.5 73.5 72.7

3. Central Excise 60.0 65.4 65.0 62.0

4. Customs 90.5 69.8 62.3 61.3

Total (1 to 4) 354.0 327.9 318.0 308.0

Reasons for revision

— Contraction in imports which caused erosion in the 40 per cent of tax base relating to international trade, consisting of customs duties, Sales Tax and Income Tax at the import stage.

— Reduction in the maximum rate of duties on imports from 45 per cent to 35 per cent.

— Excessive refunds/rebates paid to the exporters to the extent of Rs. 9.8 billion during the year as compared to last year.

— Reduction in government expenditure due to economy drive which had bearing on Income Tax collection at source from the Government departments and Central Excise Duty on Telephone.

—Increase in cash L/C margin (30 per cent) due to forex constraints. The collection of tax with return of income has shown a decline from Rs 6001.1 million in the year 1997-98 to Rs. 3778.9 million in 1998-99 i.e. a shortfall of 37 per cent.

— The collection of withholding tax on interest on securities has shown a negative growth of 22 per cent.

— Curtailment in development expenditure resulting in lower collection from Direct and Indirect taxes.

— General economic slow down.

— Economic sanctions (post nuclear blasts scenario)

Another exercise has been carried out in the CBR for head-wise enhanced targets of collection during the current year which is as follows:-

Revenue Target

Heads

 

1. 2.

1. Direct Taxes 124.5

2. Sales Tax 95.5

3. Central Excise 65.0

4. Customs 71.0

Total (1 to 4) 356.0

 

The prospects of realization of these targets are very good in view of following measures being taken by the CBR.

 

— Better management of withholding taxes.

— Improvement in audit capacity to combat large scale tax evasion.

— Outsourcing of audit of complex revenue yielding cases.

— Broadening of tax base including external survey.

— Restructuring of CBR.

— Introduction of Common Identification Number.

— Quick rewards and swift punishments.

— Greater emphasis on recovery of arrears and revenue blocked in court cases.

— Quicker assessment and clearance of imported goods.

— Improvement in examination and valuation systems.

— Expeditious disposal of goods overstaying in bonds.

— Acceleration of pace of auctions/disposal of confiscated goods.

— Encashment of ripe bank guarantees/indemnity bonds etc.

— Reactivation of anti-smuggling/anti-evasion activities.

— Use of Information Technology.

— Improved training and HRD.

 

Following chart gives the figures of the tax targets for each quarter of the current year compared with the actual collection of the preceding three years:

Quarterly Tax Collection (Net)

Years 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

Net %age Net %age Net %age Net %age Net

 

Collection in Total Collection in Total Collection in Total

Collection in Total Collection

 

1 2 3 4 5 6 7 8 9 10

Direct Taxes

1996-97 14,052 16.5% 23,391 27.5% 18,386 21.6% 29,231 34.4% 85,060

1997-98 17,5O5 17.0% 25,630 24.8% 22,986 22.3% 37,061 35.9% 103,182

1998-99 19,523 17.7% 25,845 23.4% 23,415 21.2% 41,691 37.7% 110,402

1999 - 2000 22,303 7.9% 28,890 23.2% 27,342 22.0% 45,955 35.9% 124,500

(Projection)

 

Sales Tax

1996-97 11,9451 21.5% 18,839 33.8% 12,135 21.8% 12,7491 22.9% 55,668

1997-98 11,752 21.8% 13,124 24.3% 11,319 21.0% 17,747 32.9% 53,942

1998-99 11,2131 15.6% 17,596 24.5% l8,424 25.6% 24,699 34.3% 71,932

1999-2000 20,055 21.0% 20,055 21.0% 23,875 25.00% 31,515 33.0% 95,500

(Projection)

 

Central Excise

1996-57 ll,020 19.9% 13,748 24.9% 13,613 24.6% 16,884 30-6% 55,265

1997-98 13,978 22.5% 14,794 23.9% 14,728 23.8% 18,561 29.9% 62,011

l998-99 13,240 21.7% 15,194 24.9% 14,043 23.1% 18,427 30.3% 60,904

1999-2000 13,588 20 9% 15,686 24.1% 15,660 24.1% 20,066 30.9% 65,000

(Projection)

 

Customs

1996-97 2O,688 24.0% 24,054 27.9% 20,641 24.0% 20,711 24.1% 86,094

1997-98 18,430 24.7% 18,950 25.4% 16,610 22.3% 20,506 27.5% 74,496

1998-99 14,743 22.6% 15,358 23.5% 15,166 23.2% 20,025 30.7% 65,292

1999-2000 15,790 22.2% 17,993 25.3% 17,195 24.2% 20,022 28.2% 71,000

(Projection)

 

Total Federal Taxes

1996-97 57,705 20.5% 80,032 28.4% 64,775 23.0% 79,575 28.2% 282,087

1997-98 61,615 21.0% 72,498 24.7% 65,643 22.4% 93,875 32.0% 293,631

1998-99 58,719 19.0% 73,993 24.0% 71,048 23.0% 104,770 34.0% 308,530

1999-2000 7l,736 20.2% 82,624 23.2% 84,072 23.6% 117,568 33.0% 356,000

(Projection)