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Unimpressive tax collection numbers

In pursuit of the whooping tax collection target of Rs5.5 trillion for fiscal year of 2019-20, the Federal Board of Revenue (FBR) seems to lose the battle as the shortfall in tax revenue in the first five months has widened to Rs218 billion. If the bad show continues, the federal government may come up with a mini-budget or it will have to argue with the International Monetary Fund to revise the target. Both scenarios have bleak chances of success. The gap was bound to widen after the FBR showed weak resolve to implement its reforms despite their approval from taxpayers and economists. First, it began the documentation of taxpayers and got added one million new entities to the net last year. The pace seems to have lost the steam as this year, after the lapse of back to back two deadlines, the number of return filers is below last year’s figures – 2.6 million. So far, only 1.59 million returns have been filed. It has yet to be seen if the extended deadline of two weeks will help meet last year’s figure or not.
When the government set the tax revenue target of Rs5.5 trillion on the IMF’s instructions, many called it an unrealistic or impossible to achieve goal. So many people also believed that the economic growth of the country had the potential to meet the figure if tax and economic reforms were implemented. FBR Chairman Shabbar Zaidi was tasked with making a turnaround in revenue collection.
Downward slide in the collection is often linked with a sharp decline in customs duty revenues stemming from contraction in imports, another healthy sign, but it is not out of place to mention that the FBR’s flurry of concessions to traders has adversely impacted the tax collection drive. In a recent development, Chairman Zaidi assured businessmen that FBR teams would not raid places of registered taxpayers. Of course, raids panic traders but equally it is true that traders have yet to come to terms with the prospect of a documented economy, which is the need of the new age. The FBR chairman is also going to revise turnover tax terms and threshold for small traders. Such steps are welcome only if they yield good results and promote a tax payment culture.



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