The tax collection numbers from the last six months are in, and they make for a dismal reading. The government has missed all of its revenue collection targets. There was a Rs 287 billion shortfall, despite two downward revisions of the target itself, and the introduction of several new taxation measures alongside the increase of existing tax rates. Under normal circumstances, this would lead one to believe that the targets themselves were the problem, but given that the government adjusted them twice in the hopes of meeting revised versions, revenue collection itself must also be blamed.
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In fairness, the revenue collection targets are not something that the government is deciding unilaterally; the IMF and other financial conditionalities we have to meet entail that the estimates are kept at a very high level; ones which we failed to meet by a large margin. But sadly, this reality does not change the fact that the government is steering the economy through very difficult times and only ambitious attempts at revival will drag us out of this mess.
Having said this, the government cannot be excused for failing to collect the required sum in all three sectors; income, sales and import revenue collection. Many officers within the FBR were not optimistic about the targets in the first place and saw the task before them as nearly impossible. Elected representatives have to answer for claims and promises made, especially if the bureaucrats and operational staff that actually carry out the tasks of the state do not expect to carry out the sort of work promised by the government. Collection in major city centres such as Karachi and Lahore was supposed to make up for a large portion of the targets, and any shortfall indicates that it is in these areas where numbers were much lower than initially expected. There were also hopes within FBR of greatly improving revenue collection by taxing former zero-rated goods such as surgical items, leather, sports goods and cotton ginning. But this first-time collection was not as successful as hoped; officers related to this process have revealed that both the tax payers and even the collectors themselves were not prepared for the new taxation regime and lacked the training and awareness to capitalise on what was seen as a crucial revenue stream to meet the established targets.
At the end of the day, Rs 287 billion in shortfall tells us that the targets themselves were set at an unrealistic level. But this figure also contradicts the “increased and more efficient” tax collection narrative that the ruling party has been propagating. The taxation system is still riddled with the age-old problems of corruption in city centres, inefficiency, lack of training and a dearth of awareness in the taxpayers themselves. We can only hope that the state does a better job in the next six months.
(This news/article originally appeared in The Nation on January 2nd, 2020)