Friday September 24, 2021

To materialise Rs5,800 bn FBR target: Govt plans to get additional revenue of Rs480 bn

ISLAMABAD: The government plans to get additional revenues of Rs480 billion in the upcoming budget through abolishing Income Tax and Sales Tax exemptions and improved administrative measures in order to materialize the FBR’s desired target of Rs5,800 billion.

However, ironically the Islamabad Capital Administration has slashed down property valuation rates in the federal capital instead of jacking it up to bring them at par with the market rates.

There will be slight adjustments in major taxes with the purpose to streamline the taxation system as the number of salaries slabs would be brought down, rental income would be adjusted, two dozen withholding taxes would be abolished, Point of Sale (POS) machine would be installed at 85,000 branded chains in urban centers with 12 percent for textile and 14 percent GST for other sectors and discretionary powers of tax officials would be curtailed to restore confidence of taxpayers.

According to fiscal framework agreed with the IMF, the FBR’s target for the next budget was envisaged at Rs5,800 billion on the basis of revenue collection of Rs4,700 billion achieved in the outgoing fiscal year.

With nominal growth of 13.2 percent including real GDP growth rate of 5 percent and inflation at 8.2 percent, the FBR revenues could be increased to Rs5,320.4 billion. Now the remaining Rs480 billion will have to be collected through abolishing tax exemptions, upward adjustment in taxes in a few selected cases such as increasing tax burden for higher income slabs, rental income and abolishing withholding taxes by around two dozen, bringing down tax burden on telecom sector and slashing down tariff on import tariff lines in the coming budget. The government has estimated that doing away of income tax and sales tax exemption would bring Rs140 billion taxes into the national kitty.

When contacted, former chairman FBR Shabbar Zaidi on Wednesday said that it would be hard for the FBR to collect Rs4,700 billion in the outgoing fiscal year and it could hardly go up to Rs4,500 to Rs4,600 billion maximum. He said that there was a dire need to ensure enforcement of CNIC condition for buyers and its limit could be increased to Rs0.5 million to Rs one million. This condition applies to Rs100,000 purchase of goods on buyers. The former chairman FBR said that abolishing income tax and sales tax exemptions would bring a meager tax collection but instead of discussing the next budget target, the FBR would have to strive for achieving the outgoing fiscal year’s target.

The official sources said that the government also plans to introduce third party audit from the next fiscal year. One FBR official termed it as old wine in a new bottle and said that it was an old concept of undertaking audit by chartered accountant firms, which had failed many years ago. It was stopped because it had failed to yield any desired results. “If this is the idea, then it is like disbanding the revenue agency when you have no trust in it. It is required to improve internal controls to ensure that discretionary powers are used judiciously. Who would bother to comply if top functionaries of government possessed such low trust in your tax machinery?” He added the FBR possessed all relevant data and these facts could be checked before enforcement of old ideas.