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October 18, 2020

FBR says revenue target oblivion to ground reality

Business

October 18, 2020

KARACHI: The Federal Board of Revenue (FBR) has termed the tax revenue target set for the last fiscal year as unrealistic in the backdrop of slowdown in economic activities, it was learnt on Saturday.

“Target for the FY 2019/20 requiring (initially) a growth of nearly 40 percent was ambitious to some extent particularly if viewed in the light of economic conditions in the country and contractionary fiscal policy,” FBR said in the bi-annual review for January-June 2020.

Due to multiple revisions, the FBR, however, met the annual target for the last fiscal year and collected Rs3.9 trillion.

The ambitious revenue collection targets are resulting in demoralisation of tax officials. This can also be seen in the case of fiscal year 2018/19 when the annual collection was reversed for the first time to Rs3.8 billion in 50 years.

The data released by the FBR for the years 2010/11 to 2019/20 revealed that the tax authorities only once achieved the tax target in 2015/16. The FBR was assigned an original target of Rs3.1 trillion in 2015/16 and had surpassed the target. The failure of FBR in achieving tax collection targets also resulted in widening of the budget deficit every year. Ambitious tax revenue plans boasted by successive governments over a decade have been scuttled every year with the apex tax authority having faced sheer failure in achieving the unrealistic targets.

The FBR failed to meet 90 percent of the annual targets during the last decade, which was due to FBR’s poor performance and ambitious targets set by the policymakers in order to make attractive economic figures at the start of every fiscal year.

At the time of presenting a budget every year, the government projected revenue collection on the higher side in order to estimate a lower budget deficit. However, in contrast the analysis of budget deficits revealed the different story.

The analysis of the past three fiscal years showed that the government estimated budget deficit at 7.1 percent for fiscal year 2019/20, which ended at 8.1 percent to the GDP.

Further, for the fiscal years 2018/19 and 2017/18 the fiscal deficits were estimated at 4.9 percent and 4.1 percent at the time of presenting the budgets for respective years. However, the years ended with the deficit of 8.9 percent for 2018/19 and 6.6 percent for 2017/18. The fixation of higher targets has its repercussions. To achieve the desired revenue collection targets, the FBR passes on burden to its field offices. Furthermore, the performance of taxmen has been linked with tax collection, which leads to difficulties and harassment to the taxpayers.

Besides, the government in order to achieve the higher targets used to introduce additional tax measures, which add insult to injury of the compliant taxpayers.