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FBR digs out reasons behind decline in duty collection: Member Customs

FBR digs out reasons behind decline in duty collection: Member Customs

ISLAMABAD: Federal Board of Revenue (FBR) has unearthed that the value of dutiable imports in dollar terms declined by 6.5 percent during the first quarter (July-September) period of the current fiscal year, causing worry among the tax managers for achieving the desired tax target of Rs 2475 billion for 2013-14.

A detailed investigation done by FBR reveals that the country’s overall imports increased by 12 percent in dollar terms in the first quarter of the current financial year but the value of dutiable imports slashed down in a big way. The imports of auto parts and vehicles declined by 23 percent in the first quarter of the current fiscal year mainly because of amnesty scheme and increased tax rates on auto parts.

Many tax experts say that FBR was used to collect over 40 percent taxes at import stage but declining value of dutiable imports was attributed as sign of recession in the economy.

But the FBR’s findings showed that duty free imports were increasing because of Free Trade Agreements (FTAs), Preferential Trade Agreements (PTAs) and concessionary Statutory Regulatory Orders (SROs) so the tax machinery would have to find out ways and means to remove distortions in the tax system and policies of the country. There are many important revenue spinner items such as steel, plastic, some items of foods such as chocolates and others as well as some others which also showed declining trend in the ongoing financial year.

The rampant increase in duty-free imports from China jumped up in the first quarter of the current fiscal year but it mainly increased in those items which were duty-free under FTA regime.

When contacted, FBR’s Member Customs Nisar Muhammad said that they prepared a detailed report for ascertaining facts and reasons behind decline in revenue collection at import stage and would submit it before Chairman FBR Tariq Bajwa for taking remedial measures to improve the situation.

Pakistan’s tax revenue-to-GDP ratio, at about 10 percent of GDP, remains among the lowest in the world among non-oil exporters. Tax loopholes, exemptions and concessions have left a small pool for taxation. For example, agriculture is mostly outside the tax net, and the number of taxpayers filing income tax returns is very small relative to the size of the population of about 1 percent.

In order to resolve the existing difficult situation, the FBR’s authorities are working on Plan B by revising evaluation rates of those items which are not duty free but play an important role for boosting tax revenues of the country.

“We have recently increased fixed evaluation on imports of cosmetics items from 88 cents to $2.5,” said one of the FBR official and added that they were also making efforts to replicate WeBOC on all entry and exit points of the country.

The performance of FBR’s subsidiary, Pakistan Revenue Authority Limited (PRAL), has not been up to the mark so the tax authorities were facing multiple problems to replicate WeBOC in all over the country because unified evaluation system required unified system for clearance in all entry and exit points of the country.

“It should have been replicated at this point of time but it got delayed but efforts are underway to come up with unified solution to resolve the issue of under declaration,” said the official.

He added that Customs Collectors were directed to share information with other colleagues about evaluation on which high revenue spinner items were cleared at their points so exchange of information could also bar the way for clearing goods at different rates.

According to FBR’s official data, the revenue collection in shape of Customs Duty declined by Rs 2 billion as it stood at Rs 55 billion during July 1, 2013 to October 3, 2013 compared to collection of Rs 57 billion in the same period of the last financial year.