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It totally depends upon the forthcoming situation, which nobody knows exactly.

Oct 08 - 14, 2001

The first quarter of the current financial year (July-Sept. 2001) has ended with a dismal note as far as revenue collection is concerned. According to the provisional figures, the Central Board of Revenue (CBR) has collected Rs.72.19 billion against the original target of Rs.81.5 billion and revised downward target of Rs.79.5 billion.

The current financial year seems to have begun with a disappointing performance of the CBR. It was perhaps for the first time in the history of Pakistan that the revenue target for the current financial year (2001-2002) was revised downward by Rs.13 billion during the first quarter. As per practice in the past, the successive governments had been fixing ambitious revenue targets in the budget and then trying hard to convince the donors that the target will be met. It was always by the end of 3rd quarter that the Finance Ministry would publicly admit the targets were unrealistic and impossible to achieve.

A revenue target of Rs.457 billion was fixed for the current fiscal. It was good on the part of the government that only in view of two months (July and August 2001) performance, the government realised that the target fixed were on the high side and needed downward revision. In consultation with IMF mission which visited Pakistan last month the government agreed to a revised target of Rs.444 billion for the current financial year. According to the independent analysts, however, even this target appeared ambitious in view of July-August performance in which only Rs.44.7 billion could be collected against the target of Rs.81.5 billion set for the first quarter (July-September 2001). Consequently target for the first quarter was brought down to Rs.79.5 from Rs.81.5 billion.

The monthly net collection of September was Rs.25.7 billion as compared to Rs. 32.489 billion during the corresponding period last fiscal, indicating a deficit of about Rs.7 billion.

According to the monthly breakup compiled on Sunday, the direct taxes collection stood at Rs, 7.5 billion in September as compared to Rs. 9.73 billion showing a shortfall of Rs. 2.23 billion. The sales tax receipts were Rs.11.3 billion against Rs. 12.05 billion indicating a decrease of Rs.0.75 billion. The collection of Central Excise Duty (CED) was Rs.3.5 billion against Rs.4.3 billion showing a shortfall of Rs.0.8 billion. The total tax collection in lieu of customs duty was Rs.3.4 billion in September as compared to Rs.6.4 billion in the same period last fiscal.

These provisional figures have been compiled on the basis of tax data received from all Collectorates of Customs, Sales Tax and Central Excise. However, after receiving collection from farflung areas, the CBR senior officials are however still confident to cross the barrier of Rs.78 billion in the first three months of the current financial year.

The negative growth in tax receipts for the first quarter of the year work out to a little over 9 per cent. The slowdown in tax receipts would appear to be more alarming if a comparison is made with the target of Rs.91.8 billion fixed by the IMF for the first quarter, and the shortfall would stand as high as Rs.20 billion. The tax collection target has been set at Rs.444 billion, and only through the achievement of this level of tax revenue would the government be able to reduce the budget deficit to 4.9 per cent of the GDP as required under an agreement with the IMF.

The slower pace of tax collections in the current financial year appears to be a surprising reversal in the context of the extraordinary campaign of the Central Board of Revenue with tax surveys throughout the country which were aimed at broadening the tax base and enrolling new tax payers in addition to detecting tax evasion. It has been frequently claimed by the CBR officials that they have collected valuable data through the tax surveys and that several thousand new tax payers have been brought into the net of direct taxes. A beginning of the favourable impact of these efforts could reasonably be expected to show up with the commencement of the new financial year. But the actual figures of tax collections for the first quarter exhibit a negative trend in growth which is undoubtedly a setback to all expectations of a turnaround in economic activity. Growth in tax collections undoubtedly reflects a sustained upturn in business and investment activity, and when the general slowdown in the economy is persistent the tax revenue can hardly be expected to show improvement although the taxation departments have been active on all fronts, including direct and indirect taxation avenues. The campaign of spot assessment of tax liabilities has also apparently failed to contribute to an increase in tax revenue as may be noted from the tax receipts of the first quarter. The government's efforts to implement reforms with a view to eliminating inefficiency and corruption in the taxation departments have also evidently not produced the desired results.

It is now clear that the CBR will not be in a position to collect Rs.444 billion in the current fiscal year, which has already been revised one time by the economic managers of Pakistan with the consent of IMF high-ups for the current fiscal" a CBR official confided. He admitted that senior CBR officials were trying their best to improve the revenue collection but "the prevailing war fever is impacting on the present government's desperate efforts to give boost to the lax revenue collection". If the CBR manages to pour Rs.4 billion more into the national kitty, there would be a gap of Rs, 5 billion to achieve the desired revenue target for the first quarter. The CBR high-ups opined that if war fever persisted for next two to three months, it would affect revenue collection endeavours by Rs.25 to 50 billion, creating huge fiscal problems for Pakistan.

But independent experts believe that the revenue shortfall could be more than from the CBR estimates and it totally depends upon the forthcoming situation, which nobody knows exactly. It will be really an achievement of Pakistan if it collected revenue more than Rs.400 billion in the current fiscal year, if the war erupted and continued in the region for next three months, an expert said.