Tax revision

This refers to the news story ‘Pakistan, IMF agree on cutting FBR’s tax collection target by Rs233 bn’ (Nov 5). One fails to understand why unrealistic targets are fixed in the first instance which cannot be expected to be achieved. That the IMF has agreed to a downward revision in the tax collection target for year 2020 is no reason for satisfaction. How the shortfall of Rs233 billion will be bridged in the budget has not been explained. Going by the trend for the first four months (July-Oct) of the year, in which the shortfall stands at Rs167 billion, there is likelihood that the shortfall by June 20 may amount to a staggering Rs500 billon instead of the Rs233 billion currently estimated and another downward revision may be required later on. A reason cited for the shortfall is the import compression and consequently lower collection of taxes at the import stage. But the import compression was not only known but programmed as such to reduce the current account deficit that actually necessitated seeking the IMF support. It is a monumental blunder if the import compression was not considered in working out the tax collection numbers. It speaks volumes about the competence level in budget formulation and non-seriousness in setting viable targets.

The major cause for the shortfall, however, is that the government has not been able to realize tax from traders and service providers, where huge evasion is taking place according to the FBR’s own claim. The documentation campaign has floundered under pressure from the traders and a three-month extension has again been given for implementation. Such relaxation shows the weakness of the government and preference of political expediency over the reform agenda. It is time the government showed zero leniency in the collection of tax from every section of the business community.

Huma Arif

Karachi