PTI govt faces daunting challenge to meet its Rs8 billion tax collection target

The slashed income tax rates incorporated by the previous government would make it difficult for the FBR to achieve budgetary targets set for FY19 due to the recent changes has effectively exempted 1.2 million out of 1.4 million taxpayers, as per their projections

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ISLAMABAD: The new PTI government faces a quandary as the previous PML-N government decreased the income tax rates and Prime Minister Imran Khan has stated targeting of doubling revenue collection.

During his first address to the nation on Sunday night, Khan promised to revamp the Federal Board of Revenue (FBR), with a focus on taking Pakistan on the path of fiscal independence, reports The News.

The slashed income tax rates incorporated by the previous government would make it difficult for the FBR to achieve budgetary targets set for FY19 due to the recent changes has effectively exempted 1.2 million out of 1.4 million taxpayers, as per their projections.

The tax regulator has been directed to collection Rs4,435 billion this year compared to an actual collection of Rs3,735 billion in FY18, itself a Rs200 billion deficit on the three-times revised target in FY18.

Consequently, the new PTI government would face challenges in achieving its revenue collection target of Rs8,000 billion set by it during its election campaign.

Data provided by the FBR revealed a sharp rise in tax exemption ceiling to Rs1.2 million a year from Rs400,000 and the corresponding collection in fixed payable rates had serious consequences for the national exchequer.

According to an FBR assessment “This one step has resulted into exclusion of 1.2 million from tax net out of total 1.4 million so there are only 200,000 taxpayers exists on the list.”

And FBR’s analysis of total returns of 1.4 million taxpayers disclosed 634,688 salaried employees, “Associated of Persons” and companies earned Rs400,000 in last financial year, hence they wouldn’t be liable to pay income tax this year.

Also, around 431,452 individuals, whose yearly taxable income was more than Rs400,00 but less than Rs800,000 would pay a token amount of tax.

And a similar methodology is applicable to around 140,756 taxpayers earning more than Rs800,000 but less than Rs1.2 million in the last financial year.

According to data available from the tax regulator, 158,250 taxpayers declared income of over Rs1.2 million and less than Rs2.4 million per year.

And 40,441 taxpayers having taxable income of over Rs2.4 million and less than Rs3.6 million. Also, 45,278 taxpayers declared an annual income of over Rs3.6 million.