The Federal Board of Revenue (FBR) continues to squeeze the honest tax payers through higher income tax, indirect taxation gimmicks like withholding taxes and excise duties while making no effort to claw in a vast majority of identified non-tax paying rich people.
These shocking details have been revealed in the Biannual Review Report of the FBR regarding the tax performance during the July-December period of the current fiscal year.
The report admits that the most important tax measure, the sales tax, collection has failed to get a double digit growth during the first six months of the current fiscal year. The indirect taxation measures like the withholding taxes and federal excise duty (FED) have gained double digit growth.
There is no mention about any of the efforts of the FBR to claw in one million rich people who have been outside the income tax net for last many decades. “No mention of the FBR efforts to include new taxpayers either means they are befooling the IFIs or they are non-serious about it,” official source said, adding that the report lacked information regarding tax machinery’s efforts to gather more taxes for the state.
It is important to mention the latest letter of intent issued to the IMF in March this year does mention that the government has sent notices to 0.7 million non-taxpayers out of which 0.35 million were being aggressively pursued to be brought into the tax net. However, the report has nothing to offer on the real efforts to claw in the tax evaders.
It says the direct taxes have contributed 39% in the total tax receipts collected during first half of the current fiscal year. The net collection stood at Rs 458.9 billion reflecting a growth of 20.1% over the corresponding period last year. However, the structure of income tax is heavily based on withholding taxes (WHT), voluntary payments (VP) and slightly on the collection on demand (COD). The collection shows that the share of WHT, VP and COD in gross collection has been 64.2%, 27.3% and 6.7% respectively during the first half of the current fiscal year.
WHT contributes a major chunk – around 65% in the collection of income tax. The WHT collection during first half has been Rs 275.4 billion against Rs 233.2 billion the same period last fiscal indicating a growth of 22%. The major contributes to WHT include salary, telephone, import, export, bank interest/securities, cash withdrawal, dividends and electricity. The highest growth in WHT collection has been from electricity (51%), followed by cash withdrawal (26%), salary (25.5%), contracts and bank interest (24%) each.
The sales tax is the top revenue generating source of federal tax receipts. It constitutes 44% of the total net revenue collection. The collection during July-December 2014- 15 has been Rs 513.7 billion against Rs 481.7 billion in the corresponding period of last year. The overall sales tax collection grew by around 7%. The collection of sales tax domestic grew by just 1.7%, whereas, sales tax imports increased by 11.4%. The overall net collection of Sales Tax Domestic (STD) was Rs 239 billion against Rs 235 billion in the same period last fiscal showing a growth of only 1.7%.
The share of sales tax (imports) in total sales tax net collection is more than 50%. The net collection of sales tax imports during first half current fiscal stood at Rs 274.8 billion against Rs 246.7 billion last fiscal.
Item-wise details indicate that the collection from POL products was Rs 80.9 billion against Rs 88.9 billion in the July-December previous year. The collection declined by 8.9% due to 8.4% decline in the import value of POL products. The import value of edible oil has marginally increased. In absolute terms, Rs 12.7 billion have been collected against Rs 16.7 billion last fiscal. The oil seeds were at the top with around 199%, followed by electrical machinery 137%, iron and steel 79% machinery 64%, vehicle 29% and plastic resins and fertilizers around 25% each.
Customs duty is still one of the significant source of collection of federal taxes. It constitutes 19% and 11.5% of the indirect taxes and federal taxes respectively. The gross and net collection from customs duty during July-December, 2014-15 has been Rs 140.6 billion and Rs 135.3 billion respectively entailing growths of 22.2% and 22.9% respectively. The base of customs duties is dutiable imports and it grew by 8.6%.
Automobile is the leading revenue spinner, has contributed 15.6% in the customs duty during first half and recorded growth of 34.8% in the collection due to 25.6% growth in its dutiable imports. The electrical machinery mainly consumer electronics, is the second major contributor of customs duty. The collection of customs from electrical machinery has exhibited a massive growth of 149.6%.
The FED constitutes 9% of indirect taxes and 5.5% of the federal taxes collected by FBR. The collection from federal excise duties has registered a growth of 10.9% during first half as compared to the corresponding period last year. The net revenue stood at Rs 64 billion during July-December, 2014-15 against Rs 57.7 billion during the corresponding period last year. The cigarette is the top revenue generating source of FED and it alone contributed 44% of the collection of FED. Other major items contributing have been services (international air travel), beverages, cement, natural gas and edible oils.
It is important to mention that FBR was allocated a target of Rs 2,810 billion for the current fiscal year, around 24% higher than the collection of the last fiscal. However it was revised downward to Rs 2691 billion. During first half of the first fiscal, the FBR has gathered Rs 1171 billion, which is 13.6% higher than the collection realised during the same period last fiscal.