Keeping in mind the track record of the Central Board
of Revenue (CBR), it came as pleasant surprise to learn that it has
almost met its target of revenue collection for the 3rd quarter of the
current fiscal year as well. A spokesman of the CBR told that according
to the provisional figures it has collected Rs.309.2 billion during the
first 9 months (July 2002 to March 2003) of current financial year
against the target of Rs.310.1 billion. This is despite huge payments
made by the CBR on account of sales tax refunds.
This provisional collection figure of Rs.309.2
billion during July-March (2002-03) reflects an overall improvement of
14.6 per cent as compared to collection of Rs.269.8 billion in
corresponding period last year. The tax manager are confident to
generate an additional amount of Rs.2 billion with the compilation of
final figures. The authorities have expressed hope that final collection
would definitely reach Rs.310.3 billion, which would cover the
shortfall. If the tax agency managed to achieve the figure of Rs.310.3
billion for the first nine months, it would mark an improvement of over
15 per cent against last year's amount.
The provisional collection in March has come to
Rs.37.5 billion, while the tax authorities are confident that the final
figure would exceed Rs.38.6 billion. Even the provisional figure of
Rs.37.5 billion shows an upward trend as compared to collection of
Rs.34.9 billion during March last year.
According to the break-up of provisional collection
in the first nine months of the current fiscal year, sales tax receipts
were Rs.138.8 billion, customs duty Rs.45.3 billion, Rs.30.8 billion
central excise duty (CED) and income tax Rs.94.4 billion.
The monthly break-up indicates that Rs.16.3 billion
was collected as sales tax, Rs.6.4 billion as customs duty, Rs.3.6
billion as central excise duty (CED); and Rs.11.2 billion as income tax.
The tax authorities opined that the CBR has not
withheld any refund during the current year for bolstering the
collection figures. The CBR has paid a total of Rs.59.3 billion as
refund to the exporters up to March 2003. An amount of Rs.35 billion has
been paid as sales tax refund against Rs.30.5 billion last year i.e. an
increase of 14.8 per cent. On the income tax side, the CBR has paid
Rs.10 billion refund against Rs.8.6 billion in the previous year an
increase of 16.3 per cent.
According to CBR, the authorities have paid Rs.14.2
billion as duty drawback up to March, 2003 against Rs.23.8 billion in
the same period last fiscal. The major savings were reported in customs
duty drawback reason being rationalisation and correction of duty
drawback on exports, CBR added.
The achievement of the budget revenue goals appeared
achievable, although adverse regional security developments could
rapidly change the position, the IMF maintained during recent visit of
The regional comparison given by the IMF indicates
that the CBR's collection was 12.8 per cent of the GDP in 2002, India
14.9 per cent, Kyrgyzstan 13.8 per cent; Malaysia 15.9 per cent and Sri
Lanka 15 per cent of the GDP.
The comparison of the break-up of collection of taxes
(per cent of GDP) for 2001 indicate, GST, 4.4 per cent of the GDP,
excise 1.4 per cent, direct taxes 3.7 per cent, customs duty, 1.9 per
cent and other taxes 1.5 per cent of the GDP.
According to tax experts different governments in
past have failed to bring the desired improvements through conventional
methods and there is a need to initiate concerted efforts with a clear
mind to bridge the fiscal deficit of the country with our own resources,
hovering around more than Rs.200 billion per annum.
The Chairman of the CBR Riaz Ahmed Malik, speaking at
the national tax conference 2003, on "tax culture for revival of
economy" explained some of the causes of low tax to GDP ratio in
Pakistan which was at present estimated at 12 to 13 per cent. According
to him, the recent cuts in taxes and levies were largely responsible for
further fall in this ratio to the extent of 3 to 4 per cent. These
measures were initiated by way of bringing about reforms in the tax
system to promote tax culture in the country. He referred to the drastic
slashing in customs tariffs from 85 per cent about five years ago to 25
per cent at present. This step was justified, he said, because in his
view, high duties implied larger tax incidence on the industrial sector,
which hampered investment activity. He also mentioned other measures
such as abolition of wealth tax, raising of tax exemption limit from
Rs.60,000 to 80,000, decrease income tax rate on companies from 45 to 35
per cent and on banks from 67 to 50 per cent, which also contributed to
the reduction in this ratio.
Some of these reasons are appreciable but at the same time it cannot
be denied that the process of tax reforms is yet to go a long way
whereby the CBR is to be converted into a autonomous organisation. At
the same time reforms also aim at imparting training facilities to the
tax officials with a view to meeting the international standards in the
methods of tax assessment. The ultimate objective to cleanse the tax
departments of corruption in collusion with tax evaders is yet to be
achieved to the satisfaction of the taxpayers in general.