It is not impossible if corruption is
From Shamim Ahmed
Apr 10 - 16, 2000
Preparation of the budget for the fiscal year 2000-2001 is in advance
stages and, as has been the practice during the last few years, highly ambitious targets
of revenue generation are being proposed. According to reports, Central Board of Revenue
(CBR) are estimating a giant leap of over Rs. 100 billion in the tax revenue during the
next financial year.
This quantum jump is being justified due to on going efforts by the CBR
for expansion in tax net and discovery of concealed tax potential. The revenue target for
the fiscal year 2000-2001 is being proposed around Rs. 450 billion as against Rs. 356
billion for the current fiscal year.
During the first 9 months (July-March) of the current fiscal year, the
CBR has been able to collect about Rs. 237 billion. It has to collect Rs. 119 billion
during the remaining 3 months (April-June 2000). To collect about Rs. 40 billion per month
against an monthly average of Rs. 26.3 billion during the past nine months and Rs. 28
billion during March 2000, appears to be an uphill task. Independent economists are
apprehending a shortfall of about Rs. 30 billion between the target and actual collection
during the current (1999-2000) financial year. We had a similar experience during the
previous (1998-99) year. Initially the estimates were put at Rs. 355 billion but later
revised downward to Rs. 330 billion in view of the actual collection of the first six
months. It however, finally ended up with Rs. 308 billion showing a shortfall Rs. 47
billion if compared to original estimates and Rs. 22 billion in relation to revised
target. While fixing revenue target at Rs. 356 billion for the current fiscal year the
then chairman CBR had boasted that he had not tried to please the government by suggesting
unattainable ambitious target and the figure of Rs. 356 billion (against Rs. 355 billion
during the earlier year) were most realistic and easily achievable target.
In Pakistan, fiscal imbalances and the consequent debt burden have all
along been the major cause of macro-economic instability, impending the medium and
long-term growth prospects. Recognizing the crucial importance of reversing the trend,
every government has sought to achieve a big breakthrough by mobilising a higher level of
tax revenues by undertaking various measures.
A look at the actual data, however, reveals a completely different
picture. Policy statements generally turned out to be hollow and political rhetoric.
During the three years ending 1998-99, the rise in federal tax revenues has been so low
that the ratio of actual tax collections to GDP has declined continuously from 15.5 per
cent in 1995-96 to only 10.2 per cent in 1998-99. This clearly shows the inability of the
governments to capture a reasonable level of taxes from rising incomes. It may also be
mentioned that tax-GDP ratio in comparable economies is significantly higher than in
Pakistan which means that it is not the level of income but other problems that are
responsible for this dismal state of affairs in the country.
Another distinguishing feature of the fiscal scene has been the
fixation of ambitious targets of tax collections at the beginning of the year and then
revising them downwards periodically during the course of the year in line with the actual
monthly receipts. Perhaps the same mistake is being repeated now while preparing budget
for the year 2000-2001. Various hints dropped by the Finance Minister and other government
functionaries reveal an almost complete overhaul of the present system on pragmatic and
efficient lines. According to a latest report, the government is aiming at a revenue
collection target of Rs. 450 billion or about 14 per cent of GDP. This, if realised, would
be an unprecedented improvement of about Rs. 120 billion in tax collections in a single
year. Given the enormity of problems, this is a very noble objective. In fact, that is
what is very badly needed if the country has to meet its ordinary expenditures including
on defence, moderately modernise its infrastructure, and embark upon some of the poverty
alleviating and employment generating plans without unleashing inflationary forces. This
is also essential to have a meaningful dialogue with Fund.
This appears highly ambitious but it is not impossible to collect Rs.
450 billion as tax revenues if the corruption is controlled considerably, if not totally
eliminated, in the tax collecting organization, tax evasion is checked and concealed
wealth is brought into tax net. The present government seems earnest in controlling these
impediments in growth of national economy. The Finance Minister, Mr. Shaukat Aziz appears
determined to raise the tax GDP ratio to about 13.5 to 14 per cent in the coming fiscal
year through his tax reforms. He is working overtime and is, hopefully, endowed the proper
vision and iron will to steer the country out of the existing hopeless fiscal situation.
While we wish him best of luck and success in his plans and programme we may advise him to
put his fully weight on the CBR to meet the target fixed for the current year. There are
still 3 months left and the feared shortfall of Rs. 25 to 30 billion can be met if an all
out efforts are made. Only then public will believe in Shaukat Aziz's claims for the next