Higher inflation jacks FBR’s revenue collection up: SBP

Higher inflation jacks FBR’s revenue collection up: SBP

KARACHI: Higher inflation has jacked up the revenue collection for Federal Board of Revenue (FBR) besides other factors including increase in tax rates and reinstatement of tax on telecom services, State Bank of Pakistan (SBP) said on Monday.

The SBP in its quarterly report on state of economy for July – September 2019/2020 said that the overall FBR taxes grew 15.2 percent in first quarter of 2019/2020, compared to the 8.8 percent rise noted in the same quarter of the last fiscal year.

This higher growth can be attributed to: (i) an increase in sales tax rates; (ii) reinstatement of taxes on telecom services; (iii) an upward revision of tax rates on various salary slabs; (iv) increase in interest rates and higher tax on profit on debt;3 (v) upward revision in the federal excise duty (FED) rates; and (vi) the abolishment of the zero rating regime on five export-oriented sectors.

“In addition to these measures, the impact of higher inflation also boosted revenue mobilization.”

For 2019/2020, the SBP’s projections at the start of the year (July 2019) clocked in at an elevated range of 11-12 percent. Not only was this range higher than previously projected, but it was also in excess of the medium-term target of 5-7 percent.

Despite this improvement, the FBR managed to achieve only 17.3 percent of the annual target of Rs 5,555.0 billion for 2019/2020. “This means that tax revenues would require a substantially higher growth in the remaining 9 months of the year to achieve the full year target.”

Moreover, import-related taxes, representing nearly half of FBR taxes, would remain under stress due to the ongoing declining trend in imports. Dutiable imports, in particular, declined sharply in the first quarter of 2019/2020.

Encouragingly, the fiscal authorities have introduced some initiatives to facilitate business and individual tax payers and to broaden the tax base.

For instance, in order to provide hassle-free refunds to exporters, the FBR has introduced the Fully Automated Sales Tax e-Refund (FASTER) system for tackling refund claims within 72 hours.

The FBR has also launched a mobile application, “FBR Tax Asaan,” to facilitate taxpayers in paying sales tax and claiming refunds.

In addition, video tutorials are prepared and uploaded online to guide taxpayers in filing their income tax returns.

These efforts to simplify and streamline the taxation mechanism have also contributed to the improvement in Pakistan’s ranking in the World Bank’s Ease of Doing Business: the digitization of tax collecting procedures was cited as one of the drivers of the improvement in the country’s ranking. In addition, the government has continued its drive to increase documentation in the economy.

However, businesses are resisting some of these documentation measures, such as the CNIC condition on business-to-business (B2B) and business-to-consumer (B2C) transactions.

Leave a Reply

You have to agree to the comment policy.