The government sought help on Friday from the National Assembly’s Standing Committee on Finance for the imposition of the Reformed General Sales Tax (RGST) from the next fiscal year, with a plea that the country’s economic difficulties would not end without its imposition. In a meeting chaired by Fauzia Wahab and also attended by opposition members, senior officials of the Federal Board of Revenue (FBR), including Chairman Salman Siddique and Inland Revenue Member Khawar Khursheed Butt, briefed the committee.
Talking to reporters after the meeting, Wahab said that the government was not in a position to enhance salaries during the next fiscal year. “When there is no income for the government, how it can increase the salaries?” she questioned. On the FBR proposals, she said the committee was briefed on the gross asset tax in place of turnover tax.
She said that the committee approved a proposal given by the Muttahida Qaumi Movement (MQM) to include Pakistan Railways in the freight operations of the Afghan transit trade as the National Logistics Cell alone could not meet the huge demand alone. She said the tax collection target of Rs 1.952 trillion for the next fiscal year was achievable, and could even be exceeded if the deficiencies in the tax system were addressed. She said the committee was told that 700,000 new taxpayers who were immensely rich but avoided paying taxes were identified.
The committee asked the FBR to bring these people into the tax net. FBR’s revenue collection and future strategy contained two strategies for revenue collection, with and without the RGST. The first strategy sought the imposition of RGST, which would make possible additional collection of Rs 72 billion, while the administrative measures would help fetch Rs 36 billion to reach the target of Rs 1.952 trillion for the next fiscal year.
Without RGST there would be a 16 percent growth in revenues over the target of current fiscal’s year, while Rs 90 billion would be collected on withdrawal of GST exemptions, and ending zero rating and administrative measures would help generate another Rs 70 billion. The committee was told that if the FBR managed to achieve the tax collection target of Rs 1.588 trillion during this fiscal year then the tax to Gross Domestic Product (GDP) ratio would be 9.1 percent of the GDP.
Next year, FBR planned to enhance the ratio to 9.5 percent, the meeting was told. However, an FBR report mentioned that the tax to GDP ratio was 11.7 percent on average in the 1980s, 11.2 percent in the 1990s, but had declined to 9.3 percent in the 2000s.
