While a full quarter of the current financial was
still in hand, the Central Board of Revenue (CBR) has not only matched
the revenue collection target for the period but has managed to exceed
the actual target during first nine months of the year. So far, it has
collected over Rs400 billion by the end of March 31, 2005 exceeding by
Rs2 billion of the targeted amount.
The tax collecting authorities were confident to
hit the target of Rs580 billion, set for the full year ending June 30,
During the first half of the current fiscal, the
CBR had exceeded the six monthly targets by Rs11 billion as the amount
collected during the said period was estimated at Rs261 billion as
against the set target of Rs250 billion.
During the last quarter, the total collection has
been about Rs139 billion. In the remaining three months (April-June),
the CBR is required to collect Rs180 billion to meet the target of
Originally, the revenue target was revised to Rs590
billion reportedly on the advice of IMF review committee in September
The tax-wise details confirm that the direct tax
revenue has increased by 14.2 percent during this period reaching to
Rs119.2 billion against Rs104.4 billion last year. The overall sales
tax collection, during the first nine months has reached Rs164.0
billion, indicating a growth of 5.3 percent over the last year. Within
sales tax, 14.6 percent growth has been observed for the import stage.
The collection on account of customs duties has gone up to Rs79.3
billion against Rs62.8 billion during past year, indicating a growth
of 26.1 percent. Similarly, the central excise duty collection has
increased by 17.3 percent during July-March, 2005 by collecting Rs35.7
billion. The provisional collection of March 2005 stands at Rs57.2
billion with the break up of Rs18.8 billion as sales tax, Rs11.3
billion as customs, Rs4.2 billion as central excise and Rs22.9 billion
in direct taxes.
Obviously, the CBR seems to be more satisfied over
its performance, the independent economist, however, believe that this
increase in revenue generation has been mainly because of growing
Though all segments of the taxes have shown
improvement yet the custom duty and sales tax at import stage have
emerged as the main contributors to the improved revenue collection.
The break down of the target of Rs580 billion for
the current financial year indicates that the Board has to collect
Rs181.9 billion in the form of direct taxes, Rs103.2 billion from
customs duty, Rs249 billion sales tax and Rs47.7 billion on account of
The financial analysts were of the view that it
should not be so difficult for the CBR even to go for an amount of
Rs600 billion in the backdrop of the economic turnaround and more
vibrant corporate sector.
An increase in the import of about $3 billion
during the year should be suffice to the additional revenue collection
of Rs20 billion to fill the gap between the original target of Rs580
billion and the revised figures of Rs600 billion.
The revenue collected on imports has the potential
to produce more revenues provided some effective mechanism to check
under invoicing was developed by the CBR. It is usually observed that
the government was losing huge revenues due to unchecked under
invoicing by some unscrupulous importers. Though the increased imports
may widen the trade deficit pulling pressure on foreign exchange
reserves on one hand, and on the other hand these imports would
certainly reinforce economic activity especially in the exports
regime, which will ultimately generate more revenue in the
Commenting on the unprecedented $3 billion trade
deficit in the first 9 months of the current financial year, Dr.
Ashfaq Hasan Khan, the spokesman of the Ministry of Finance was of the
view that it is neither unusual nor formidable for the economic
development of the country as such a gap helps generating economic
activity in the overall economic scenario of the country.
Pakistan is witnessing an accelerated level of
economic growth, much beyond the initial outlook for the current
financial year. Therefore, the rising level of economic activity is
bound to increase the demand for imports at a much faster rate than it
was anticipated, Ashfaq observed.
He said the imports at a larger scale were largely
driven due to 32 percent increase in import of machinery and
equipment, a good sign for economic growth of the country. Government
on its part was also confident that the prevailing trend will
definitely lend a supporting hand to attain the impressive growth rate
of 8 percent in next two years.
It is, however, painful to observe that the CBR was
depending for its revenue collection drive on the indirect taxes
rather than striving for broadening the base of direct taxes by
bringing the potential tax payers into the tax net.
Surprisingly, out of the total revenues collected
in Pakistan, the direct tax hardly contributes around 30 percent in
the annual target set in the budget.
Since the indirect taxes are comparatively easy to
recover, the governments in the past preferred to choose the easy way
of collecting revenue through indirect taxes. Contrary to the claims
made by the governments in the past to reduce the sufferings of the
poor, they continued to add burden on the poor by treating the rich
and the poor with a same yardstick of indirect taxes, the weak system
finds it difficult to tame the powerful and influential wealthy class
in the tax regime.
The poverty which rising at an alarming pace in the
given circumstance, it is the time for the decision makers to
concentrate more on broadening the tax net by bringing more and more
tax evaders into the net of direct taxes. Burden of indirect taxes
coupled with mounting inflationary pressures is hitting hard to the
purchasing power of the common man. All basic needs essential for life
especially the food items and the medicines needed to be exempted from
In its drive to identify new taxpayers, the CBR has
detected over 18000 tax evaders. The drive should be followed more
vigorously as the number of tax evaders as well as avoiders was still
much higher in the country. Relying on indirect taxes should be
reduced gradually by intensifying drive for enhancing the contribution
of the direct taxes. The number of registered taxpayers of 1.2 million
out of a population of 150 million is far less than the world average.