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Currency devaluation to augment FBR’s effort on revenue collection 

Currency devaluation to augment FBR’s effort on revenue collection 

ISLAMABAD: Devaluation of rupee against the dollar will further augment the efforts to enhance the revenue collection by the Federal Board of Revenue (FBR) because the currency depreciation will increase the tune of exports as well as imports.

Moreover, authorities in FBR are of the stance that customs and regulatory duties at the import stage have been the main contributor to the revenue collection. In this regard, the provisional customs duty collection during the first half of the year stood at around Rs290 billion up by 33% year-on-year.

Therefore, a source at FBR told Customs Today that currency devaluation would further augment FBR’s efforts for revenue collection just because of the fact that ratio and percentage of taxes on even daily commodities would also increase with the increase of their prices domestically.

“The main reason behind the substantial increase in customs duty collection was the levy of regulatory duty on hundreds of tariff lines to curb imports as the share of customs duty used to be one-tenth in total revenue collection that has now almost doubled” the source maintained.

“Since coming to power in 2013” the source said adding that the government implemented an ambitious economic reform program. As a result, external and internal macroeconomic balances improved markedly and the country made strides in important agendas, such as taxation, the energy sector and the business environment.

Therefore, the source told that FBR performance in tax collection was up to the mark like last several years of very strong performance; however, reforms in areas that required collaboration between federal and provincial governments remain challenging.

“Reform momentum will need to continue to maintain macroeconomic stability and accelerate growth” the source said adding that provinces also had a role to play in promoting ongoing economic growth because revenue collection was an area in which the provinces could make a much greater contribution to the country’s reform effort.

The source said that Punjab’s own-source tax revenues had grown significantly over recent years yet, Punjab’s revenue potential stood at Rs432 billion, compared with an actual collection in FY16 of Rs108 billion.

“This tax gap is driven by a mixture of tax policy and administration shortcomings. Particular challenges include: jurisdictional overlaps between different levels of government; large tax exemptions; low compliance; weaknesses in tax administration; and weak coordination among provincial administration bodies” the source maintained.

The source said that tax gaps were associated with the General Sales Tax on Services and the Urban Immoveable Property Tax, which could vastly increase their collections by eliminating exemptions, increasing the range of services or properties subject to the taxes, and thro ugh more accurate data on the services sector and property valuations.

It is pertinent to note here that FBR is also struggling to improve the narrow tax base, as despite numerous extensions, the number of income tax return filers remained at 1.140 million -down from 1.216 million.

Under the law, all citizens of the country are bound to file income tax returns after the close of a fiscal year. Pakistan has one of the lowest tax-to-GDP ratios in the world. The FBR’s tax-to-GDP ratio remained at 10.5% at the end of the last fiscal year 2016-17.