Govt revises down FY17 direct tax collection target by Rs180bln

KARACHI: Government has brought the direct tax revenue collection target down around Rs180 billion for the outgoing fiscal year of 2016/17 as the Federal Board of Revenue (FBR) has to make refunds on advance taxes taken during the previous fiscal year, an expert said on Wednesday.  

“The FBR failed to achieve the income tax target due to adjustment of refunds and advances taken in the last fiscal year to reach the revenue collection target,” said Ikram-ul-Haq, a senior tax consultant at Huzaima and Ikram.

The finance ministry has already revised downward the revenue collection target for the current fiscal year by Rs100 billion to Rs3,521 billion from an actual target of Rs3,621 billion.

Revenue collection target for direct taxes was cut to Rs1,378.84 billion for FY17 from the actual target of Rs1,558 billion, according to a budget document for FY18. The target of income tax collection – the major component of direct taxes – has been reduced to Rs1,363.84 billion from an actual target of Rs1,538.75 billion.

Ikram said the FBR has been taking advances from big companies for the past several years to meet its annual targets. “This year it has reached on its saturation point and big companies are unable to give money in advance.”

He added that banks and petroleum sectors are the major direct tax contributors but both the sectors remained unable to pay advances to FBR as per the requirement. “Yet, the FBR has taken some advances for the current fiscal year in order to reach near to the target.”

Finance minister and FBR’s senior officials claimed that shortfall in the outgoing fiscal year was due to incentives given under sales tax regime, especially for petroleum, zero-rating and fertilizers; notwithstanding, target for sales tax collection has been increased to Rs1,445 billion as against the actual target of Rs1,437 billion.

Notably, the collection target of indirect taxes has been revised upward to Rs2,142 billion from Rs2,063 billion for FY17. Improved revenue collection at import stage increased the sales tax collection as well as boosted the customs duty collection.

Therefore, the target for customs duty collection was raised to Rs491 billion from Rs413 billion for the outgoing fiscal year. Due to a drastic decline in revenue from tobacco sector, the federal excise duty collection been revised down to Rs206 billion from Rs213 billion.

The government has set Rs4,013 billion as the FBR’s tax revenue collection target for the next fiscal year. Tax experts termed this ambitious since the FBR would not be able to achieve even the revised collection target of Rs3,521 billion for the current fiscal year of 2016/17.