The Federal Board of Revenue (FBR) exceeded its first quarter revenue target and received 1.4 trillion rupees, but failed to broaden the tax base as the number of filers fell from 42% to just 1.8 million until the legal deadline.

Due to the inability to increase the number of filers and the collapse of the IT system on the last day, the RBF extended the deadline by 15 days from September 30, which was set in the Ordinance on income tax.

“The RBF is pleased to extend the filing date for tax returns for the 2021 tax year by 15 days due to serious technical issues in the online tax filing system (IRIS),” a statement said. released Thursday.

The government earlier promised to improve the RBF’s computer system after the worst hack last month.

By the end of the legal deadline, less than 1.8 million people had filed tax returns for tax year 2021, down 1.3 million or 42% from tax year 2020 , according to an FBR official.

Technical issues aside, the government has failed to instill confidence in taxpayers so that they can become tax filers.

Prior to becoming Prime Minister, Imran Khan believed that the government of Nawaz Sharif was an obstacle to broadening the tax base and improving tax collection.

The RBF had hoped it would receive at least 3.5 million tax returns this year due to its aggressive campaigning and facilitation from the business community. He was reluctant to grant an extension without imposing some sort of monetary penalty, but it was a political decision to extend the deadline for filing returns.

The tax administration has managed to maintain a healthy momentum of increasing tax collection, largely aided by the increase in imports which provided more than half of total tax revenue and also helped to camouflage the weaknesses of the economy.

Read Government extends deadline for filing income tax returns

Against the target of Rs1.21 billion, the RBF tentatively raised Rs1.397 billion, exceeding the target of Rs187 billion, according to the bureau.

The inflows were also significantly higher than the previous year, which will strengthen the government’s case before the International Monetary Fund (IMF).

The FBR collected 65.5% or Rs916 billion in indirect taxes – general sales tax, customs duties and federal excise duties, which are the three main sources of indirect taxes.

Likewise, 718 billion rupees or more than 51% of the total collection was at the import stage.

The spectacular performance at the start of the year shows that the RBF is on track to meet the assigned target of 5,829 billion rupees for fiscal 22 despite the daunting challenges, the compelling constraints posed by the Covid pandemic. 19 and the sporadic tax cuts announced by the government as relief and price stabilization measures, the RBF said.

But the use of indirect taxes has increased inflationary pressures at a time when the country is experiencing a depreciation of the rupee.

The FBR collected Rs481 billion in income taxes in the first quarter, up Rs98 billion or 27% from the same period last year. The collection was Rs52 billion more than the target.

The share of income tax in total revenue was 34.5%, which increased the burden on people with lower capacity to pay. Pakistan’s Tehreek-e-Insaf (PTI) electoral manifesto promised to increase the share of direct taxes from 38% to 45%.

The RBF saw a 44% growth in sales tax collection during the July-September period due to a heavy reliance on import taxes. He collected 624 billion rupees in sales tax in three months, up from 190 billion rupees.

Read The RBF supports the appeal process

However, almost all of the increase occurred at the import stage, as domestic sales tax collection remained almost stable.

The FBR collected 200 billion rupees in domestic general sales tax (GST) compared to 198 billion rupees last year, after adjusting for refunds.

Contrary to this, the levy of the GST at the import stage amounted to Rs 424 billion in the first quarter of FY22 compared to Rs 236 billion last year, an increase of Rs 188 billion. or 80%.

The total sales tax collection of Rs 624 billion was Rs 100 billion above target due to collection at the import stage.

The collection of federal excise duties amounted to Rs71 billion in three months, Rs13 billion or 22% more than the corresponding period of the previous year.

Likewise, the collection of customs duties increased to 221 billion rupees, or 67 billion rupees or 44%.

The central bank has introduced a 100% cash margin requirement for 114 additional items to curb imports, which will have implications for RBF revenues. However, it was the need of the hour after the government had failed to correct the structural flaws in the economy over the past three years.

Net inflows in September 2021 amounted to Rs 535 billion, registering a 31% increase from the Rs 408 billion collected in September 2020, the RBF said.

Posted in The Express Tribune, October 1st, 2021.

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