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Effective enforcement need of the hour

Effective enforcement need of the hour

ISLAMABAD: The improved performance of tax collection machinery (FBR) can make a real difference in terms of displaying a tag of success for IMF’s sponsored bailout package of $6.67 billion for Pakistan’s ailing economy under Extended Fund Facility (EFF).

This 36-months program of IMF will be derailed if FBR fails in improving stagnant tax-to-GDP ratio by broadening of narrowed tax base. IMF had projected a revenue collection of Rs 2345 billion but FBR envisaged an ambitious tax target of Rs 2,475 billion for fiscal year 2013-14.

So far in first four months (July-Oct) period, FBR’s collection crossed Rs 636 billion marks, which is less than its own envisaged target but it crossed IMF’s projection.

Keeping in view FBR’s performance, top notches in FBR believe that the tax machinery’s performance could be divided into two parts for analyzing last fiscal year collection. During first six months (July-Dec) period in last financial year, FBR performed well to some extent so the high baseline is not showing the real efforts being multiplied by the incumbent team during the same period of the ongoing fiscal year. The revenue collection will show marvelous results in second half (Jan-June) 2014 when it will be compared with low base on the basis of dismal performance of FBR in the same period of the last financial year.

But there is one cause of worrisome for tax managers as oil prices in international market are on declining trend and one of major revenue spinners in shape of POL products would become cheaper thus reducing the revenue collection of FBR.

But there are some silver lines for increasing hopes of the economic managers as the Large Scale Manufacturing (LSM) achieved impressive growth of 6.5 percent in first two months (July and August) as compared to negative growth for the same period of the last financial year.

In higher growth of LSM, there is need to analyze major contributing sectors such as textiles that played a key role but it is yet to see how much the government shows its political will for placing an effective enforcement.