Interim Prime Minister Anwaarul Haq Kakar said on Thursday that the government was looking for a new chairman of the Federal Board of Revenue (FBR) to improve tax collection through documentation of the economy.
The premier made the statement during his maiden interaction with media persons. On the same day, the FBR reported results of revenue collection for the first two months (July and August) of current fiscal year. It exceeded the two-month target by Rs25 billion.
Against the target of Rs1.183 trillion, the FBR provisionally collected Rs1.208 trillion in taxes on the back of improved growth in income tax receipts.
“We are head-hunting to appoint a new chairman of the FBR and the process is expected to be completed in the next few days,” said the premier.
He added that no one was ready to enter the database and with a tax-to-GDP (gross domestic product) ratio of less than 9%, “we cannot resolve our problems”.
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The low tax collection has remained a chronic issue as taxation has skewed towards the indirect mode that has hurt poor people the most. Despite imposing heavy taxes in the last fiscal year, the FBR collected Rs7.164 trillion, hardly equal to 8.6% of the national economy.
One of the reasons for the low collection was political patronage of tax-evading sectors like real estate, traders, stock market and exporters. Salaried class paid Rs264 billion in taxes in the last fiscal year compared to payment of just Rs74 billion by the exporters.
The Pakistan Democratic Movement (PDM) government had appointed Amjad Zubair Tiwana the FBR chairman hardly a month ago. His tenure may be the shortest if a new chairman comes within a week’s time. Tiwana has experience in both tax policy and operations.
Kakar said that his government’s target was to document the undocumented economy and “we are considering increasing the tax collection to Rs10 trillion or even more”.
For the current fiscal year, Pakistan has agreed with the International Monetary Fund (IMF) that it will strive to collect Rs9.415 trillion in taxes. However, most of these taxes are indirect in nature.
It will be not for the first time that a chairman from the private sector will be appointed. Earlier, Pervez Musharraf, Pakistan Peoples Party and Pakistan Tehreek-e-Insaf governments appointed FBR chairpersons from the private sector.
Except for Abdullah Yousaf, the other two chairmen struggled hard and could not complete their terms.
To a question about enforcing the recommendations given by the Revenue and Reforms Mobilisation Commission (RRMC) in its interim report, Finance Minister Dr Shamshad Akhtar stated that she was looking at those recommendations but the interim setup could not introduce a new legislation to implement those.
The PM said that the current tax system was flawed and no government made serious efforts to bring any meaningful change.
Meanwhile, the FBR reported a healthy trend in revenue collection that grew 26.3% to Rs1.208 trillion, exceeding the two-month target by Rs25 billion.
It was the second consecutive month when the FBR achieved its monthly target. It collected Rs669 billion in August against receipt of Rs494 billion in the same month of last year, displaying a growth of 35.4%.
The target for the second consecutive month along with other structural and indicative benchmarks of the standby arrangement was met, according to the FBR.
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Of the four types of taxes – income tax, sales tax, federal excise duty and customs duty, the FBR met income tax and federal excise duty collection targets.
Income tax collection amounted to Rs488 billion, up Rs141 billion, or 41%, during the first two months of current fiscal year. Income tax collection was nearly Rs60 billion more than the target, offsetting the impact of missed sales tax and custom duty targets.
Sales tax remained a weak area as its collection reached Rs473 billion, which was Rs66 billion more than the last fiscal year with 16% growth. However, the amount was Rs15 billion less than the target.
The FBR collected Rs80 billion in federal excise duty with a growth rate of 57%. It was Rs9 billion more than the two-month target.
The overall collection of customs duty stood below target by Rs34 billion. The FBR received Rs166 billion in customs duty, which was 20% higher than last year. Rupee devaluation and an increase in commodity prices in the global market helped improve the customs duty collection.
Published in The Express Tribune, September 1st, 2023.
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