ISLAMABAD:
The Federal Board of Revenue (FBR) has started the new fiscal year on a strong note, exceeding its first-month target of Rs656 billion despite the daunting challenge of collecting due taxes from traders who paid only Rs1,500 income tax under the new scheme in the first month.
Against the Rs656 billion monthly target, the FBR pooled Rs659.5 billion, achieving a growth rate of just under 22%. To reach the gigantic annual tax target of nearly Rs13 trillion, the FBR needs to post a 40% growth rate this fiscal year.
According to an FBR press statement, the agency has successfully achieved the revenue target for the first month of the current fiscal year. This promising start for financial year 2024-25 highlights the outstanding effort to meet the monthly tax target despite the country’s economic challenges, it added.
The FBR’s performance amidst the current financial and economic difficulties reflects the unwavering dedication of tax officials to achieve the assigned target for the current financial year, said the FBR. The outgoing Chairman FBR, Malik Amjad Zubair Tiwana, has once again proven his critics wrong by achieving the first-month target. This achievement also marks his last month in service, as he has sought early retirement in protest against the prime minister’s attitude.
Tiwana has requested retirement effective August 15th, and the prime minister may fulfil his desire to appoint an officer from the Pakistan Administrative Service (PAS) as chairman of the FBR.
However, the FBR did not receive any significant amount under the new scheme for traders. July 31st was the last day for receiving the first tranche from traders under the new scheme. The FBR, however, received only Rs1,500 income tax in the first month, as only three traders paid any tax. One trader settled his annual maximum tax liability of Rs1,200 by paying only Rs900 in income tax. Under the scheme, if a trader pays the entire fiscal year tax in advance, he is entitled to a 25% discount.
A senior FBR official stated that the FBR would start implementing punitive measures against non-compliant traders, including sealing their shops for seven days and imposing imprisonment of up to six months. However, it would be very difficult for tax officials to take these measures due to a lack of the required workforce.
The government has now imposed up to 2.5% withholding tax on supplies made to retailers to collect Rs95 billion in this new fiscal year. It was not clear how much withholding tax under this head was collected in the first month.
The FBR has also not yet notified the revised property valuation rates, which were supposed to take effect from July. Tax authorities have estimated additional annual revenue of Rs30 billion from increasing property valuations for collecting federal taxes. By this count, the FBR lost Rs2.5 billion in July by not timely notifying the new valuation rates.
One reason for the delay is the revision in criteria, as the FBR is also going to include build-up area in the category of properties that it determines for collecting withholding taxes from real estate, said a senior FBR official.
The government has significantly increased the tax rates on the sale and purchase of properties by non-filers. But it has also introduced the late-filer category to facilitate people to pay less than the non-filer rate.
For the new fiscal year, the government has set a Rs12.970 trillion tax target for the FBR, which now requires a 40% increase in collection.
Income tax collection amounted to Rs284 billion in July, which was Rs48 billion or 20% higher than the previous year. Higher banking profits and contributions by the salaried class played a pivotal role in the income tax collection.
Sales tax collection remained at Rs256 billion, higher by Rs54 billion or 27% compared to the previous year. The FBR collected Rs92 billion sales tax at the domestic stage compared to Rs51 billion last year due to the imposition of taxes across many areas, including milk. At the import stage, the FBR collected Rs163 billion in sales taxes, up by 6%.
The FBR collected Rs38 billion in Federal Excise Duty (FED), which was Rs7 billion or 22% higher than the previous fiscal year. The government doubled the federal excise duty on cement and imposed the duty on lubricant oil and sales of plots and buildings in the budget.
The collection on account of customs duties ended up at Rs82 billion, up by Rs9.6 billion or 13.3%.
Meanwhile, the All Pakistan Textile Mills Association on Wednesday requested the FBR to extend the date for filing sales tax returns. It wrote to the FBR that millers were unable to file their sales tax returns by Wednesday’s deadline because LESCO and other power distribution companies failed to file their sales tax returns on time. This is creating significant operational hurdles and financial uncertainties for the businesses supplied by these DISCOs.
The gridlock resulting from SRO 350 is halting all industrial business activity across the country, it added. This regulation needs to be revisited and resolved to create a more conducive environment for economic recovery and growth.
