Statistics indicate a fair measure of success in CBR's efforts to broaden the base of taxpayers


From Shamim Ahmed Rizvi,

Oct 11 - 17, 2004




According to the provisional figures of tax collection for the first quarter of the current fiscal year (July-Sept 2004) the Central Board of Revenue (CBR) has surpassed the fixed target by over Rs. 13 billion. It has collected Rs 123.3 billion against the set target of Rs. 110 billion and Rs. 94 billion collected in the first quarter of the last year.

Official sources were optimistic that if the CBR continued to show the same healthy trend during the remaining 3 quarter the CBR would surpass the revised annual target of Rs. 590 billion (increased from Rs. 580 billion (under IMF advice).

The tax-wise details reveal that the direct tax revenue has increased by 53.9 percent during the first quarter. The overall direct tax collection for the first quarter has now reached Rs 39.4 billion against Rs. 25.6 billion during the last year. The sales tax collection at the import stage and domestic commodities has shown a growth of 20 percent. Consequently, the overall sales tax collection, during the first quarter has exceeded Rs. 50 billion mark against Rs. 41.6 billion during the last year.

In response to vibrant foreign trade activities, the collection on account of customs duties has also gone up to Rs.22.2 billion against Rs. 17.9 billion during last year, indicating a growth of 24.3 percent. Similarly, the improved industrial activity in the country has been supported by the enhanced central excise duty collection. CED collection has grown by 28.1 percent during the first quarter to reach Rs 11.5 billion during the first quarter of the fiscal year.

The relatively higher growth target for 2004-05 seems to have been set by the government keeping in view the visible turnaround in the economy during the last two years. Investment activity in the major sectors of the economy, specially in the industrial sector, has gained momentum as could be noted from the textile industry's imports of machinery worth over $2 billion during the past two years for carrying on expansion, balancing and modernization in its production facilities. These efforts in the country's major industries are reflective of hectic preparations to meet the challenge of competitions in the export market in 2005 and onwards in the wake of an end to quota restrictions on exports of textiles to the developed countries, namely USA and European Union, besides other major importers. At the same time, the growth in exports by 10 percent in the last financial year with proceeds reaching a record level of $12.27 billion also pointed to a perceptibly higher level of production in the country's higher level of production in the country's export industries, besides an overall rising tempo of economic activity.

If seen in this perspective, the potential for a well sustained rise in tax revenue has been steadily built up, which can be successfully exploited by the CBR by adopting better strategies for the task of achieving higher tax collections. These strategies include improved interaction between the taxation officials and the taxpayers, simplification of procedures of tax assessment, and implementing automation programmes, specially in customs and sales tax regimes etc. The measures such as establishment of large taxpayers units seem to have contributed positively to the improvement in tax collections. It will be of interest to recall here that the CBR's surveys to discover new taxpayers in the income tax regime have proved to be quite useful. As a result, the number of income taxpayers increased from 1.38 million in July 2002 to 1.56 million in July 2003 and further to 2,023 million in April 2004 an increase of 46.6 percent in two years. The number of sales taxpayers also increased from 145,687 in July 2002 to 157,411 in July 2003 and further to 161,648 in April 2004  an increase of 11 percent in two years.


These statistics which were part of the last budget's documents indicate a fair measure of success in CBR's efforts to broaden the base of taxpayers. However, the increase in the number of sales taxpayers reflected a rather slow pace and therefore the need to further extend the net for new sales taxpayers can hardly be overlooked. It may be pointed out here that the expected tax collection of Rs. 104 billion in the first quarter of the current financial year would work out to an average monthly collection on the basis of the full year's target of Rs. 580 billion would come to Rs. 48.33 billion. This shows that the tax collections for the first three months of 2004-05 are considerably on the lower side although the amount conforms to the target set by the CBR. The fulfillment of the target for the full year would therefore require more vigorous efforts on the part of the taxation departments in the coming nine months.