CBR has collected Rs. 261.5 billion, surpassing the revenue target of Rs. 250.1 billion during first half of the current financial year

Jan 10 - 16, 2005

Prime Minister Shaukat Aziz has appreciated the role of Chairman CBR Abdullah Yusuf and his team of tax managers for the organization's excellent performance, exceeding revenue target during July-December 2004-05. According to the updated data, the CBR has collected Rs. 261.5 billion, surpassing the revenue target of Rs. 250.1 billion during first half of the current financial year.

In a meeting held at the Prime Minister's House on Saturday last, Shaukat Aziz told Chairman CBR that the reforms process initiated by the government will continue and all necessary resources would be provided to the CBR. He said that simplification of procedures, automation and avoidance of direct contact between the government officials and taxpayers were aimed at greater transparency and these measures have yielded commendable results. "Reforms is an ongoing process and we will follow them in letter and spirit, he observed.

The CBR Chairman thanked the Prime Minster for his support and said that CBR's performance during the first six months of the current fiscal year has been exemplary. Abdullah Yusuf said that the target was fixed at Rs.250.1 billion for the period July-December. However, the actual receipts exceeded Rs. 261.5 billion showing an increase of 13.5 percent from the same period of the corresponding year. He said that the reforms agenda, use of new technology, automation etc. have made Pakistan's revenue and tax regime efficient and transparent. "Preliminary number indicate a healthy trend in revenue collection". He assured that the organization would continue working with the same devotion and dedication in the future too.

Independent economist, however, believe that this increase in revenue generation has been mainly a result of growing imports in the country. All four taxes have shown improvement but mainly the custom duties and sales taxes on import stage have contributed to improved tax collection during the first six months of the current financial year.

According to the set revenue collection target of Rs. 580 billion in the current fiscal year, the Board wants to collect Rs. 181.9 billion in shape of direct taxes, Rs. 103.2 billion in customs duty, Rs. 249 billion sales tax and Rs. 47.7 billion in excise duty. The CBR expects that it will surpass its tax collection target of Rs. 580 billion during the current fiscal year as the IMF insisted the authorities to revise it upward to the level of Rs. 590 billion. The CBR is eyeing to collect Rs. 600 billion during this fiscal year, the sources added.

The provisional revenue collection shows that the overall direct tax collection during July-December 2004 has reached Rs. 72.3 billion against Rs. 57.6 billion last year. The tax wise details confirm that the direct tax revenue has increased by 25.6 percent during this period. Within the sales tax, the collection during first two quarters had been Rs. 107.3 billion as against Rs. 99.1 billion of the corresponding periods of last year indicating a growth of 8.3 percent. This growth has largely been driven by the sales tax on imports where Rs. 68.6 billion have been collected during the first half year of current financial year against Rs. 58.0 billion last year.

The tax collection machinery has started working to come up with an integration plan of income tax and sales tax under the reform strategy the government is pursuing with the World Bank and DFID financial assistance to overhaul the tax administration. The tussle between Income Tax and Customs Groups is a well-known fact existing in the minds of dwellers of CBR headquarters and other field officers. The Income Tax Group always raised finger about the huge perks and privileges the Custom Group is obtaining.

The CBR high-ups are currently reviewing the reward given mechanism for these both groups. As the Income Tax Group always complained that the Customs men always remained able to extract lofty amounts in the shape of rewards and they don't have such mechanism especially after introduction of Universal Self-Assessment Scheme (USAS). While pursing the reform strategy, the government committed with WB for obtaining $102 million loan and $23 million grant from DFID, the CBR posted 23 officers of the Income Tax Group in the Sales Tax collectorates during October 2004.

According to independent experts, it should be not be difficult for the CBR to meet the target of Rs. 600 billion for the current financial year as the economic growth has been faster than anticipated at the time of budget making. An increase in the import of about $ 3 billion in the year should be enough to provide the additional revenue of Rs. 20 billion to meet the gap between the original garget of Rs. 580 billion and revised target of Rs 600 billion. According to them the revenues collected on imports can further be raised if CBR develops some effective mechanism to check under invoicing as the government is loosing huge amount of revenues due to under invoicing.

Increased imports, on the other hand are leading to widen the trade deficit pulling pressure on foreign exchange reserves. Commenting on the unprecedented $ 1.8 billion trade deficit in the first 5 months (July-November) of the current financial year, Finance Ministry spokesman Dr. Ashfaq Hasan Khan said it is not uncommon to see such a widening gap with the economic activity accelerating in any country. He said Pakistan is witnessing an accelerated level of economic growth, much beyond the target of the current financial year. Therefore, the rising level of economic activity is bound to increase the demand for imports much faster than was anticipated, he said adding that this higher import is largely driven by 32 percent increase in the import of machinery and equipment, which is a good sign for the country. The government is confident that if this trend continued Pakistan will attain the growth rate of 8 percent in the next two year, he claimed.