The CBR and Minister for Finance are confident that they will not only achieve but exceed the target fixed

Jul 17 - 23, 2000

Notwithstanding the apparently over-ambitious targets for the fiscal year 2000-2001, the Central Board of Revenues (CBR) has, as usual, failed to achieve the revenue targets fixed for the outgoing financial year. The total revenues collected during this period (July 1, 1999 to June 30, 2000) has been Rs.345.51 billion as against original target of Rs.356 billion.

The initial target of Rs356 billion was first increased to Rs.380 billion after levying 15 per cent GST on electricity and gas bills which Nawaz Sharif government, scared of hostile public reaction, hesitated to impose. But the present government of Gen Musharraf carried out the recommendations of the Ministry of Finance under pressure of IMF. Later on, however, the overall target, were revised downward to Rs.351 billion because of shortfall in collection of GST on trade and industry. The CBR official justify the further fall of about Rs.6 billion (collection of Rs.345 billion instead of Rs.351 billion) arguing that Rs.168 billion, about 47% of the total revised estimates for the year, was targeted to be collected at the import stage. The policy to hold US dollar artificially at a low convertible rate against the Pak rupee has been the key factor for the revenue shortfall. The rupee-dollar exchange rate favouring the rupee has resulted in low collection on imports in rupee terms, CBR officials maintain.

Speaking about the tax collection during last fiscal, member CBR Sarfraz Ahmed said, that out of the Rs.345.31 billion, the direct taxes yielded Rs.109 billion, sales tax Rs.116 billion, central excise duty Rs.55 billion and customs duty Rs.61 billion.

The total revenue receipts is 98.2 per cent of the revised target of Rs.351 billion last year which was about 14 per cent higher than the actual receipts during the financial year 1998-99. Pakistan trade gap has been recorded at $ 1.705 billion during the outgoing financial year against the estimate of 800 million dollars. The government had fixed export and import targets at 9.2 billion and 10 billion respectively. While it failed to meet its export target, its imports crossed the barrier of 10 billion. The financial year 1999-2000 ended with a fiscal deficit of about 6.1 per cent of GDP as against 4.5 per cent as estimated.

The members Sales Tax and Income Tax CBR who jointly briefed the newsmen about the actual achievements of the year 1999-2000 comparing it with the targets set for fiscal 2000-2001, said that the government had fixed the revenue collection target at Rs.435.6 billion for 2000-2001 higher by 90 billion as compared to the revised target of 1999-2000.

According to the break-up, sales tax target has been enhanced to Rs.172.5 billion from Rs.120 billion revised estimates of 1999-2000. The direct taxes receipts have been projected at Rs.137.5 billion; the share of excise duty receipts has been fixed at Rs.52.6 billion and the customs duty receipts have been projected at Rs.72.9 billion.

During the outgoing financial year the sales tax collection stood at Rs.116.62 billion as compared to the fixed target of Rs.120.5 billion. The government has collected Rs.55.5 billion in lieu of central excise duty against the target of Rs.57 billion. The customs wing aggregated an amount of Rs.61.63 billion against the target of Rs.64.8 billion.

The recovery of sales tax arrears amounted to Rs.6.6 billion during 1999-2000 as compared to Rs.4 billion of the previous year; refunds stood at Rs 22.64 billion against Rs.20.55 billion last year. Sales tax from imports totalled at Rs.67.25 billion as compared to the last fiscal's collection of Rs.43 billion and domestic revenue receipts totalled at Rs.49.7 billion.

While the budget estimates for the current fiscal year are generally believed to be too optimistic, both the CBR and Minister for Finance Mr. Shaukat Aziz are sounding more than confident that they will not only achieve but exceed the target fixed. Finance Minister talking to Dawn in New York said that the projected 24 per cent rise in tax revenue "was aggressive but not unrealistic" pointing out that without much effort this year there was a 17 per cent increase in revenues. If we don't plan aggressively we will never get out of this quagmire we are in" he added.

In fact Aziz pointed out that given the fact that country's wheat crop this year has been extraordinary the projected Gross Domestic Product (GDP) could rise from 4.5 per cent to 4.8 per cent. Next year it could be 5 per cent, he added.

Expressing confidence that country is headed in the right direction Aziz said that "the entire government machinery will be dedicated to meeting the target set in the budget. He said that "the way to look at the targets is not to look at the year to year increase only but to see the tax collection percentage of GDP. In the developed countries its 30 to 40 per cent of GDP, we only have 13 per cent. The developing countries average ranges between 18, 20 or 22 per cent of GDP.

He underscored "In the year 1999-2000 which ended June 30 our collection of taxes went up by 17 per cent, so keeping that percentage in mind 24 per cent increase in revenue with all the tax survey going on is not unreasonable". If we have fiscal autonomy and we reduce our deficit, our reliance on foreign loans and domestic loans will reduce, pointing out that presently 55 per cent of our budget goes on debt servicing". — Saying that "this is no way to live, no country can sustain itself like this, Aziz pointed out that "Every rupee people earn 55 paisa goes to debt servicing. We have no fiscal space we have to get out of this debt trap this is where our salvation lies".

The tax survey, which involves going to shop to shop, house to house, factory to factory is to register all people who are capable of paying taxes. It is a nationwide effort covering 13 cities initially covering all major commercial and residential areas which are upscale, people will say it is aggressive, people will say it is unprecedented but the problems of Pakistan are also unprecedented" the Finance Minister added.

This optimism is, however, not shared by independent economists. According to them an increase of over 90 billion (from present 345 to 435 billion) is next to impossible. Such a large increase has never been achieved before and what makes the task even more daunting is that there had been no major taxation proposal in the current year budget. Rather a net tax relief of over Rs.3 billion has been provided. How then is this ambitious target of CBR tax revenues going to be achieved, they ask.