With a historic deficit looming, what can the FBR do?

Prime Minister Shehbaz Sharif is staring down the throat of a tiger. His newly cobbled together coalition government might be swallowed up by any one of the many crises that it has inherited. Not only is the country facing massive inflation and an energy crisis unlike any other witnessed in recent times, the new government will also need nerves of steel when they present the budget for the next fiscal year in only a couple of months. 

In the budget, Pakistan is facing a historic deficit. The balance of payments is completely out of whack, the import bill is soaring because of global fuel prices, and some tough calls need to be made. In the wake of all of these rising expenditures, the Federal Board of Revenue (FBR) is under scrutiny. Can they beef up tax collection by netting some big fish? 

In the last few weeks, the board has initiated recovery of tax liability against multiple companies including those in the Telecom, Fertilizer and Cement sector. On the receiving end of the FBR’s attempt to meet collection targets were companies like Zong, Telenor, Jazz and operators in the cement & fertilizer sector as well as the National Highway Authority.  The income tax disputes in these cases are based on multiple underlying factors ranging from disallowance of various expenses to differences in interpretation of certain sections of the law.

 

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