ISLAMABAD: The government is likely to face a revenue shortfall of Rs25 to Rs30 billion during the current fiscal year, mainly due to the additional cost of military operation in South Waziristan.
The government is likely to take fiscal measures in January to meet the shortfall, said Federal Board of Revenue chairman Suhail Ahmed on Wednesday.
The new fiscal measures would not affect the common man, the FBR chairman said while talking to newsmen.
The cost of military operation in South Waziristan was not part of the federal budget for 2009-10 announced in June this year, he said.
The chairman expressed the hope that there would be no drastic shortfall in revenue collection during the second quarter of the current fiscal year, and by the end of December, the FBR expects to collect revenue totalling Rs331 billion.
December is the most crucial month in terms of revenue generation as there would be no more holidays during the month and companies, banks and financial institutions close their accounts and advance income tax has already started pouring in, said the FBR chairman. FBR has set Rs123 billion as revenue target for December and it hopes to achieve the target of Rs91 billion for November. The collection of revenue to the tune of Rs108 billion in the month of October was a big achievement despite unstable political and security situation in the country, which signals the FBR is right on track as healthy signs have started to emerge with growth turning positive from negative, Mr Ahmed explained. The FBR chairman focused on revenue collection, and admitted a shortfall of Rs7 billion in revenue collection during the first quarter that ended in September.
Despite the spill over of Rs7 billion against the unmet revenue target of Rs270 billion during the first quarter of current fiscal year, the second quarter will leave no backlog or shortfall, Mr Suhail was confident.
For the fiscal year 2009-10, the government had fixed the revenue target at Rs1380 billion, but according to Mr Suhail, the International Monetary Fund (IMF) even considered the figure of Rs1368 as realistic in view of the prevailing situation.
Elaborating as to how FBR would overcome the shortfalls, he listed measures in the enforcement plan devised by the board. The plan includes broadening of sales tax and auditing of returns filed by tax payers.
He disclosed that the FBR has given a waiver to all NTN holders to file their income tax returns by Dec 31. The data of all non-tax payers has been collected with the help of Nadra, and from mid-January the FBR would come into action to expose hidden tax-evaders, he warned.
Mr Ahmad said there were currently one million holders of NTN who do not pay any tax. Not all cases would come under severe scrutiny, only 100 to 200 cases would be picked up to set a model and we would not hesitate to arrest the big fish.
The Federal Board of Revenue will enter intohectic negotiations with IMF and World Bank on the issue of VAT and tax administration reforms, starting in Dubai on Thursday. Mr Suhail, who would lead the FBR delegation for the talks, said the first draft of the law was ready and would come up for deliberations in Dubai.
Six drafts are ready: four for provinces, one for the federal government and one for Islamabad capital territory.
‘We are facing some difficulties but will overcome them and give final shape to the VAT law which would be submitted to the parliament on Dec 31 for approval.
‘The final draft will be shared with all the four provinces whose law secretaries would be attending the Dubai meeting on VAT,’ he said.
‘The only problem we are facing is the issue of VAT against services. We will collect VAT on services on behalf of provinces and would return the collection to respective provinces without any service charge. The reason behind the collection is that provinces have no infrastructure for this,’ he said. The National Finance Commission meeting in Lahore on December 9 and 10 would sort out these matters, he said.
The VAT which would replace the existing GST would be less than sales tax, and at the same time exemptions would also be curtained, the FBR chairman explained.
The payments of refund would be handled by the five largest banks of Pakistan under the electronic payment of refund system (EPRS) in order to simplify the procedure.
The State Bank of Pakistan will be hooked up in the entire process, he said.
With reference to the tax administration reform programme, the FBR chairman said these were being done through legally and correct procedures, and not a single court in the country has ever challenged any decision on reform.
Responding to the opposition within FBR on the reform process, he said the administration is stable and there is no crisis.
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