ISLAMABAD — The government is facing difficulties to raise adequate revenues due to which it was unlikely to meet its revenue collection target of over Rs1 trillion during 2007-08.
The slow down in revenue has been witnessed during the first six months of the current financial year.
The first quarterly report of the Federal Board of Revenue (FBR) released yesterday said although the downward revised target for the first quarter has been achieved but it might put extra pressure on individual taxes performance in the second quarter.
According to the report, to circumvent any adverse outcome various initiatives have been undertaken especially in the deductions at source category within direct taxes and general sales tax (GST).
It is expected that these measures would result in improvement in tax collection in coming months. Simultaneously, a systematic audit programme has also been initiated to deal with delinquencies. Effort to mobilise additional resources through tax-gap analysis, better enforcement and efficiency gains is also continuing.
The report, however said, notwithstanding all these initiatives, the final outcome remains dependent on the strength of the economy. A continuous up-swing and a risk-free environment would mean that the resource mobilisation effort of FBR would also remain on track.
The revenue target for Fiscal Year 2007-08 was budgeted at Rs1, 025 billion that required 21.1 per cent growth over last year's collection of Rs846.4 billion. Since it was natural to assume that autonomous growth in tax base will not be sufficient to generate the additionality of more than Rs178 billion, certain budgetary measures were also introduced essentially to cover those areas that had escaped tax net for various reasons.
Under the individual tax performance during the first quarter, there has been a decline in growth of voluntary payment — a major component of direct taxes — by 19.9 per cent to Rs29.8 billion as against Rs37.2 billion last year.
On the other hand, the second component advance tax has registered a healthy growth of 21.6 per cent over previous year, reflecting sustained profitably of the corporate sector.
The share of withholding tax in gross has increased to 56.2 per cent in first quarter of current fiscal year from 44.6 per cent in the same quarter last year partly due to reduced receipts on account of voluntary payment, particularly the payments with declared returns and also as a result of substantial growth in withholding tax on contract and supplies.