CBR has to collect Rs. 194 billion during the next 5 months

From Shamim Ahmed Rizvi, Islamabad
Feb 28 - Mar 05, 2000

At the end of first seven months of the current fiscal year the Central Board of Revenue (CBR) has been able to collect only Rs. 185 billion net revenue. In order to achieve the year's target of Rs. 379 billion it would need to muster Rs. 194 billion during the next five months which is, by any standard, an uphill task.

The average monthly collection required for the next five months comes to Rs. 39 billion as against Rs. 26 billion during the outgoing seven months and actual collection of Rs. 24 billion during January 2000. The first half of the current fiscal year had ended with a total collection of Rs. 160 billion or a monthly average of Rs. 26.6 billion. The seemingly complacent CBR claimed that the first six months of the financial year are always sluggish and hoped that revenue collection would certainly improve during the remaining six months. Contrary to their hopes and expectations January 2000 proved to be most disappointing at Rs. 24.9 billion.

The revenue target for the current financial year was initially set at Rs. 356 billion against last year's actual receipts of Rs. 308 billion, which was a substantial increase. Then this target was moved to Rs. 379 billion as new post-budget additional resource mobilisation measures were announced. Now increasing revenue by about Rs. 71 billion over last year's target remains a challenging task.

It may be recalled here that the CBR had failed to achieve the target of Rs. 356 billion of tax revenue in the last financial year which though was subsequently revised downwards yet the actual collections in 1998-99 did not exceed Rs. 308 billion. It may further be pointed out that the pursuit of tax defaulters and dodgers reached a crescendo since October 1999 onwards following the dismissal of the government of Nawaz Sharif by the armed forces of the country and yet the tax target for the current fiscal year has failed to be realised. The target for 1999-2000 seemingly envisages a 23 percent increase from the actual tax revenue receipts of the last financial year but the actual performance for first seven months reflected only a 4 percent increase compared with the receipts of the comparable seven months of 1998-99. Thus the targeted increase in tax revenue would appear to be a hard nut to crack for the CBR.

It appears that lack of adequate growth in tax revenue despite the well planned projections, has compelled the present government to resort to an unpalatable course of downisizing the personnel and staff of the various government departments. According to reports, the axe has not spared the CBR and its departments from wthere over 3,000 employees have been laid off last month and more posts are likely to be abolished shortly.

It may be emphasized here that in view of the expected expansion in the sales tax department's staff in the wake of the proposed imposition of GST on a wide front including the retail trade, the staff now declared surplus may be absorbed to manage the full-fledged operation of GST. Thus what is important is the need to broaden the tax net in respect of both direct and indirect taxes which alone would be the right answer to the problem of lower tax collections. The downsizing can hardly be expected to yield any significant savings in expenditure. However, the pending cleansing of the various departments by removing officers and staff suspected of corrupt practices would have to be carried out without any hesitation.

The tax revenue which accounts for a very low ratio of 13 percent of GDP, continues to be the main cause of poor resource position of the government with the result that the development efforts in addition to the government's capability to service its domestic and foreign debts have remained far from satisfactory over the last several years. On the other hand the dependence of the government on domestic and foreign borrowings has increased. The problem of widening in the budget deficit was tackled lately by regularly slashing the development budget which is indeed a negative course and contrary to adopting ways for appropriate increase in tax revenue.

The Chief Executive, General Pervez Musharraf, who visited CBR last month to review the performance took serious note of this sluggish trend. He directed the Chairman CBR to submit to him a monthly report on revenue collection. He also directed the CBR to create a monitoring system meant to report on monthly performance on collection of taxes and disposal of references sent to CBR for processing. The monitoring of tax collection would also involve analyses of the potential of deposits in each area and sector, and the performance (input) of the individual officials given the responsibility for improving the collection.

The task assigned to CBR can be accomplished but not without revamping taxation system, restructuring the department and a close and vigilant monitoring system. The government income must outrun its expenditure to strengthen the economic foundation of the country. The successive governments have imposed new taxes of about Rs. 400 billion since 1998. A question can well be posed to CBR officials as why these additional taxation measures not reflected in government revenues.