Nov 26 - Dec 02, 2001
According to the final figures of revenue collection
during the first 4 months (July-Oct 2001) of the current financial year,
the total collection amounted to Rs. 110 billion as against the original
target of Rs. 122 billion and the revised target of Rs. 117.7 billion
showing a minimum of shortfall of over Rs. 7 billion.
The revenue receipts during the first 4 months of the
last fiscal year amounted to Rs. 112.98 billion showing a decline of
about 2.16 per cent as against an expected increase of about 10 per cent
during the current financial year.
In view of the shortfall in the month of Oct 2001 the
target for Nov. has been brought down to Rs. 33 billion from Rs. 36
billion estimated earlier, disclosed a source in the CBR adding that
revenue targets are always growth oriented and, as such, it has to be
brought down in view of the prevailing uncertain situation." The
target of Rs. 33 billion has been set in view of unidentified extent of
revenue losses. The major impact of the current crisis has hurt
collection of custom duty and sales tax at the import stage and
temporarily caused suspension of import/export activities at the
bordering custom stations in NWFP and Balochistan, he added.
Official figures released by Central Board of Revenue
(CBR) showed that revenue under the head of direct taxes registered a
growth of only 1.6 per cent and stood a Rs. 34.22 billion against Rs.
33.68 billion over the corresponding period last year, while under the
head of indirect taxes, the revenue receipt declined by 3.8 per cent to
Rs. 76.31 billion against Rs. 79.29 billion it netted during the same
period last year.
According to final figures, the tax authorities have
collected Rs. 34.22 billion during the July-October period against Rs.
35.68 billion during the same period last year, registering a marginal
increase of 1.6 per cent.
Under the head of sales tax, Rs. 47.8 billion have
been collected this year against Rs.43.25 billion over the corresponding
period last year, registering a growth of 10.6 per cent.
Similarly, under the head of customs Rs.14.88 billion
have been collected against Rs.19.02 billion during the same period last
year, showing a decline of 21.7 per cent.
The tax authorities have collected Rs.13.62bn under
the head of central excise duty during the first four months against
Rs.17 billion it netted during the last year.
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 in
September 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-October
As a matter of fact we have never achieved the annual
tax collection target for no apparent reason. This time, however, there
are some cogent reasons for the slow down. The negative economic fallout
of Afghan war and the general turmoil in the region has forced the
Musharraf government to revise downward its GDP growth and revenue
collection targets. However, what is apparently being done by our
economic managers is to fudge the figures to project a watered-down
version of the shortfall. The government proposes to cut further the
revenue collection target of Rs. 444 billion for the current fiscal year
by Rs.12-14 billion in view of the steep slide in imports. Prior to
September 11, the projected financing gap for the current year had stood
at $ 3.2 billion, which has now been revised upward. Meanwhile,
Islamabad expects to receive assistance in the shape of cash and a
further debt rescheduling from multilateral lending agencies, totalling
$ 8 billion and spread over three years, with $1 billion in cash coming
The revised revenue collection target of Rs.444
billion was itself a revision of an earlier target of Rs.457 billion,
while last year's collection was Rs.394 billion. It seems that if the
present trend continues, with a shortfall of about 4 per cent in
July-October of this fiscal, the total collection will be short of last
year's collection by Rs.15-20 billion, instead of Rs.12-14 billion, as
protected by our economic managers. Actual collection will be around
Rs.380 billion. Where will the money to fill the gaping hole of Rs. 77
billion in the budget come from? Rs.61 billion will come from the extra
aid inflows, but what about the rest? The GDP growth target is also
being revised downward at 3.7 per cent, while the ADP and IMF estimates
have put it at as low as 2.5 per cent. Any of the usual slashing of
development spending will have a negative impact on the GDP growth.
Cutting the interest rates and thus cutting domestic
debt servicing costs would be a better strategy, especially with a
resurgent rupee. Still better, savings thus secured can be utilised to
increase the volume of bank borrowings to fund more development
spending. This can help boost the GDP growth, which in turn would limit
the damage to revenue. However, before planning properly, it would be
best if the Finance Ministry started using realistic, rather than rosy,
figures for is macro-economic management policies, because they now fool