Rs15bn CVT target may be missed

Thursday, December 03, 2009
By Mehtab Haider

ISLAMABAD: Tax authorities have expressed their inability to meet the target of collecting Rs15 billion as capital value tax in 2009-10, terming it a wrong estimate. In this regard, they cite poor figures of the first quarter (July-Sept).

Capital Value Tax (CVT) is levied on land transactions of over one kanal. Although the government doubled CVT rate from 2 per cent to 4 per cent in the budget for 2009-10, it actually overestimated revenue collection at Rs15 billion against Rs4 billion netted in the last financial year.

Rather than setting a target of Rs8 billion for 2009-10, the Federal Board of Revenue fixed it at Rs15 billion, arguing that enforcement would be improved to reach the level.

However, first quarter performance clearly shows that its estimate of a four-time increase in revenue collection is flawed.

Data show the FBR collected Rs818 million as CVT on land transactions in the first quarter of the current fiscal year compared to Rs724.2 million in the same period last year.

Member Direct Taxes and official FBR spokesman Asrar Raouf, talking to reporters on Wednesday, said the FBR had deputed its officers at the Registrar Offices in Karachi as a pilot project in order to improve CVT collection.

However, he admitted the CVT could fetch only Rs8 billion in the current fiscal year with increased rate of 4 per cent compared to Rs4 billion collected at a rate of 2 per cent in the previous fiscal year.

To a question about Value Added Tax (VAT), which would be imposed from next budget, he said draft legislation of VAT would be tabled before parliament as well as in the four provincial assemblies.

VAT on services came under the jurisdiction of provinces for which they would allow the FBR to collect on their behalf and return them back, he said and claimed the FBR would not deduct service charges on VAT collection.

He also said the zero-rating facility given to five major exporting sectors might continue under the VAT regime. On the rate of VAT, he said in some EU countries VAT was 19 per cent but in Pakistan its rate might be less than the GST rate of 16 per cent.

About overall revenue collection in November, he said the FBR had so far bagged Rs79.5 billion and a few billions more would add up taking revenues to Rs82-83 billion when figures were finalised in the next few days. The target for the month was Rs91 billion.