FBR feared to lose Rs50bln on export incentive package

KARACHI: The Federal Board of Revenue (FBR) fears that it may lose Rs45 to Rs50 billion in revenue collection during the current fiscal year of 2016/17 after the government unveiled a bulky incentive package to boost exports, officials said on Saturday.

“The revenue collection at customs stage will mainly be suffered due to the incentives package,” a senior official at the FBR said on condition of anonymity. “At the customs stage, the revenue impact in the past six months was estimated at Rs28 to 30 billion.”

The official added that the monetary effect of this package on Inland Revenue was calculated at around Rs17 to 19 billion.

Earlier this week, Prime Minister Nawaz Sharif announced the export incentives package of Rs180 billion mainly for the textile industry. The total time frame of the package is 18 months. 

Under the package, the government includes yarn/grey into the list of the drawback of local taxes and levies. DLTL for yarn/grey is four percent, processed fabric (five percent), home textile (six percent), knitwear (six percent) and garments (seven percent). The government also planned to withdraw sales tax on import of textile machinery and remove four percent duty on cotton import.

The official said the government intends to encourage exporters in order to improve exports. “However, previous decisions of facilitating textile and fertiliser sectors have failed to yield results.” 

The official said the policy decisions, taken in the budget 2016/17, of not raising sales tax on petroleum products and lowering interest rates already cost the FBR Rs150 billion in the revenue collection in the first six months of the current fiscal year of 2016/17. 

Besides, the decision of not passing on the impact of high international oil prices to consumers, together with keeping the sales tax intact, cost around Rs70 billion in revenue collection.

 “The impact on revenue after the implementation of the latest package will be another blow to the tax collection efforts,” the official added.

Various estimates showed that the Kisan package incurred Rs12 billion in revenue collection losses, while zero rating of sales tax to the export sector cost Rs35 billion. 

The FBR also estimated a huge impact on revenue after the decision of lowering sales tax rate on fertilisers to five percent from 17 percent. 

Soft interest rate has already bitten the profitability of banking sector, which subsequently subtracted around Rs25 billion in the income tax collection by the FBR from the sector. 

The FBR was assigned a target to collect Rs3,621 billion during the current fiscal year. In the first half, the board managed to collect only Rs1,467 billion. This entails that the FBR is facing an uphill task of collecting Rs2,154 billion in the remaining half to meet the annual target.

Tax experts said it would not be easy for the FBR to meet the target especially ahead of general elections next year and the government would be reluctant to take tough fiscal measures.