ISLAMABAD: The tax regulator amassed Rs1.7 trillion or 45 percent of overall revenues at import stage for the just concluded financial year 2017-18.
A revision in the tax structure in the last five years has resulted in a condition in which 58 percent of sales tax and 14 percent of income tax was collected at import stage during FY18, reported Express Tribune.
This was revealed by sources in the Federal Board of Revenue and although provisional figures for tax collection hadn’t been shared, although it has been told the receipts touched Rs3.841 trillion for FY18.
The original tax collection target for FY18 by parliament was set at Rs4.013 trillion, which was revised downwards to Rs3.935 trillion a few months ago.
Aside from customs duty, the tax regulator was unable to achieve its targets for three other taxes which cast doubts over the performance of the Inland Revenue Service (IRS).
FBR’s collection of Rs3.841 trillion may be revised upwards after the State Bank of Pakistan (SBP) determined and releases the final figures of tax collection till the end of June received from offshore tax amnesty scheme.
The tax regulator has expressed optimism about tax receipts to touch Rs3.9 trillion after the final reconciled figures become available.
Out of the Rs3.841 trillion tax receipts, Rs90 billion have been received from offshore and domestic tax amnesty schemes.
Total collection for FY18 was 14.2 percent higher than the previous FY17 and the country’s tax-to-gross domestic product marginally rose to 11.1 percent, which was lower than the target set.
From the overall receipts, Rs1.7 trillion were collected at the import stage comprising of customs duty, federal excise duty (FED), withholding and sales tax.
Income tax collection at import stage was recorded at Rs220 billion, sales tax Rs855 billion, customs duty Rs610 billion and federal excise duty at Rs15 billion.
This policy of tax collection at the import stage is faulty since this would harm economic growth due to rising cost of goods.
Also, factory output would be affected which would result in lesser sales, which forces manufacturers and importers to reclaim these taxes from consumers by adding them in the cost.
Around 70 percent of the tax regulator’s workforce constitutes of offices from IRS, however, they only collect around 55 percent of taxes.
As per sources, sales tax receipts stood at Rs1.488 trillion for FY18, lower than the projected target of Rs1.6 trillion set by the parliament.
And the collection at import stage was recorded at 58 percent of total sales tax or Rs855 billion.
Custom groups collect it but constitute part of the IRS’s performance.
The sales tax collection five years ago at import stage was 51 percent which per sources indicated leagues at the domestic stage.
The FBR’s income tax collection was recorded at Rs1.53 trillion in FY18, resulting in a Rs67 billion deficit than the target set.
Withholding taxes constituted 14 percent or Rs220 billion of the collection at import stage.
Although the withholding tax is retrieved from the consumers but is declared as a contribution by importers.
Ironically, the share of overall income tax collection was two-percentage point lower than five years ago, which stood at 39 percent for FY18.
Interestingly, the FBR amassed around Rs218 billion in federal excise duty. Roughly 95 percent of the duty was collected at the domestic stage, revealed sources.
The federal excise duty collection missed its target by Rs15 billion and customs duty collection was recorded at Rs610 billion, surpassing the target by Rs29 billion.