Revenue body bets on oil tax, withdrawal of concessions to meet target

KARACHI: Government is considering emergency tax measures that include increase in taxes on petroleum products and imported goods and withdrawal of concessions to meet revenue collection target, equivalent to 11.3 percent of GDP, for the current fiscal year, sources in the finance ministry said on Wednesday.

Sources said the possible steps to increase revenue collection include increases in sales tax on petroleum products, federal excise duty on beverages, cigarettes, telecom services and local/imported vehicles, withholding tax on import of finished goods and higher sales tax rates on domestic sales by export-oriented segment.

Tax exemptions and concessions in lieu of income and sales taxes and federal excise duty are likely to be abolished to improve horizontal and vertical equity in the tax system, they added.

The government set a tax collection target of Rs4.398 trillion for the Federal Board of Revenue (FBR) for the current fiscal year. The FBR envisaged tax collection of Rs1.479 trillion in the July-November period, while the revenue shortfall stood at Rs111 billion; although the tax collection grew 6.7 percent year-on-year during the period.

“The government may increase sales tax on petroleum products and revise up rates for non-corporate taxpayers that were drastically reduced in the Finance Act 2018 to offset the revenue shortfall during the first five months,” a source said.

The government already raised sales tax rates for December after reduction of international oil prices. The new sales tax rates are eight percent on petrol, 13 percent on high speed diesel, two percent on kerosene and 0.5 percent on light diesel oil.

Though the government is anticipating additional revenue through high inflation and rupee depreciation, it would not be sufficient to match the revenue collection target that is necessary to curtail fiscal deficit that rose to 1.4 percent in the July-September period compared to 1.2 percent in the corresponding period a year earlier.

The FBR is also contemplating administrative measures to boost the revenue collection, while the government would amend some legal provisions to strengthen audit and enforcement, the sources said.

The sources said the government is relying much on recently-launched online system to monitor sales tax on supplies. The FBR has already asked businesses to electronically register points of sale to monitor retail sale of garments and leather products. The monitoring will be extended to departmental stores and shopping malls by March next year, they added.

One of the major initiatives for generating additional revenue will be imposition of penalties on non-filers, which will also reduce under- and non-reporting on incomes and sales. The apex tax authority will also launch a massive crackdown to recover tax from foreign transfers under automatic exchange of information.

The sources said the efforts have already started to yield revenues and are expected to gain momentum in the coming months. Cross matching of data from various domestic sources is also yielding good results and a number of new potential taxpayers have already been identified, they added.

The customs department is receiving trade data from China under electronic data exchange agreement to curb under-invoicing.