ISLAMABAD: Despite claims of authorities to increase the share of direct taxes in total revenue, the share of indirect taxes further increased to 60.9 percent in 2018/2019.
The Economic Survey 2018/2019 launched a day earlier, stated that the tax structure in Pakistan is skewed towards indirect taxes.
The share of indirect tax to FBR tax collection remained static around 60 percent over the last one decade.
“For fiscal year 2018/2019, the share of indirect tax collection set at 60.9 percent.”
Within indirect taxes, sales tax posted a growth of 11.8 percent in FY2018 against 2.0 percent increase in FY2017.
Strong aggregate demand and pass through of high international oil prices contributed in sales tax collection during FY2018.
The share of sales tax which constituted 64.4 percent of indirect taxes during FY2018 reduced gradually from 72.3 percent in FY2014.
Similarly, share of sales tax in total FBR tax is gradually coming down since FY2014 from 44.2 percent to 38.6 percent during FY2018.
“For FY2019, sales tax collection target set at Rs 1,700 billion which is 14.5 percent higher than last year collection and (constitute 63.0 percent of indirect tax and 38.3 percent of FBR tax collection target).”
The share of custom duty in indirect taxes has increased gradually from 17.6 percent in FY2014 to 26.4 percent in FY2018.
It is pertinent to mention that the maximum statutory rates of customs duty have been gradually reduced from 125 percent in FY1988 to 20 percent in FY2016 till date.
Consequently, the share of custom duty in FBR tax collection has reduced gradually from 45.7 percent in FY1991 to 15.8 percent in FY2018.
Custom duty collection momentum continued with the same pace and registered a growth of 22.5 percent in FY2018 against 22.8 percent in FY2017.
High aggregate demand, increase in general income level, high imports, higher commodity prices, exchange rate depreciation and fiscal measures such as regulatory duties on non-essential imports and an increase in additional custom duty by 1 percent led to increase in growth of custom duty.
Custom duty collection is estimated at Rs 735.0 billion for FY2019 which reflects an increase of 20.8 percent over last year actual tax collection.
On the other hand, the share of federal excise duty in indirect taxes declined by 9.3 percent in FY2018.
The tax base of Federal Excise Duty (FED) contracted over the years and now is restricted to only few commodities like cigarettes, cement, beverages, and international travel etc. Share of FED in total FBR tax collection has also fallen from 10.1 percent in FY2009 to 5.6 percent in FY2018.
FED registered a growth of 7.9 percent in FY2018 compared to 5.2 percent in FY2017. Collection from cement mainly fueled this growth momentum. FED is projected to Rs 265.0 billion which is 24.1 percent higher as compared with actual last year collection.
The projected share is 6.0 and 9.8 percent of FBR and indirect tax collection, respectively for FY2019.