In the wake of fixation of highly challenging tax collection target of Rs 2810 billion in fiscal year 2014-15, the FBR has been assigned to collect Rs 1180 billion in shape of Direct Taxes and Rs 1630 billion as Indirect Taxes in order to touch the desired collection figure.
Out of indirect taxes of Rs 1630 billion, the FBR has fixed tax collection target of Rs 281 billion on account of Customs Duty in the budget 2014-15 against revised collection target of Rs 241 billion for the current fiscal year. The actual target for the outgoing fiscal year 2013-14 has been fixed at 279 billion.
An unprecedented appreciation of rupee against dollar has proved good phenomena for many other sectors of the economy but it became unproductive for the tax machinery as imports declined and overall collection of the FBR affected negatively in last ongoing quarter of the outgoing fiscal year. Despite making efforts to plug leakages through enforcement of Afghan Transit Trade (ATT) agreement the sudden rise of rupee proved shocking for the tax machinery as it caused revenue loss of at least Rs 60 to 70 billion in the outgoing fiscal year. The major blow faced by the Customs Duty and collection of other taxes on imports such as withholding tax at import stage and sales tax on imports.
Keeping in view this difficult equation and the government’s preparation of budget at Rs 99 against a US dollar, the FBR will have to work hard to touch its desired tax collection target of Rs 2810 billion in fiscal year 2014-15.
For touching the collection figure of Rs 2810 billion in fiscal year 2014-15 against revised collection estimates of Rs 2275 billion, the FBR requires additional revenues of Rs 535 billion. With nominal growth of 13.1 percent over the revised collection of Rs 2275 billion plus buoyancy in tax collection, the FBR’s collection would go close to Rs 2550 billion. The FBR has estimated that it will collect additional Rs 231 billion including Rs 103 billion through withdrawal of SROs and Rs 128 billion in shape of taxation measures in order to touch the desired tax figure of Rs 2810 billion on June 30, 2015.
According to FBR’s estimates, it will collect Rs 32 billion through withdrawal of exemptions on Customs, Sales Tax Rs 35 billion and Income Tax Rs 36 billion during the fiscal year 2014-15.
In order to collect Rs 128 billion through additional tax measures, the FBR has estimated to collect Rs 4 billion through Customs Duty, Rs 16 billion through Sales Tax and Rs 108 billion through Income Tax in the fiscal year 2014-15.
Almost half of direct taxes will be collected through additional measures taken into withholding regime as the reliance on this side has been increasing with every passing year. But the tax experts say that the time has come that the FBR should develop its capacity to abandon withholding tax regime and convert it on return based filers by utilizing data warehouse in the context of increasing Information Technology (IT) and without creating harassment among taxpayers.