News Analysis |
The Pakistan Muslim League-Nawaz (PML-N) on Thursday released Rs 31.3bn sales tax refunds to traders and exporters on the last day of its five-year tenure. Federal Board of Revenue issued a press release on May 31st to release further refunds of Rs 31.3 billion, to take the total amount of refunds issued during the year, to more than Rs 100 billion in first 11 months.
It is the hike of staggering 85.12 % as FBR had only issued Rs 54 billion during the entire 12 months of the previous year. If the interim government decides to increase the payout, it can even further improve the stat/number.
In a last-ditch political move to woo the traders in the upcoming July 25 general elections, the Ministry of Finance has asked the FBR to prepare a list of claimants who will receive a refund in their taxpayers’ account within 24-hours of the notification. The decision is also significant in a context that government is facing massive short in its revenue collection.
Despite the fact that FBR is all set to miss the target figure, the government has increased its expenditure to use the money to persuade business community to vote in PML-N’s favor.
FBR says that during the first 11 months of the current financial year government has recorded a provisional net revenue collection of over Rs3274 billion. During the same period of the previous fiscal year, the government had collected Rs2854 billion excluding collection on account of book adjustments which depicts an increase of around 15%.
FBR was already facing a shortfall of Rs 78bn revising the target of Rs 4013 to Rs 3935 bn. Moreover, even to achieve this revised target in last month of the fiscal year, the government will have to raise additional Rs 661 billion, which is a gigantic task. The PML-N government completed its tenure on May 31. Now, the caretaker government of Nasir ul Mulk which assumed powers today [June 01] will have to complete the targets for the fiscal year 2017-18.
Although, according to the official statement from FBR, the provisional collection for the month of May 2018 is Rs351 billion excluding collection on account of book adjustments. It witnessed an increase of 1.85% as RS346 billion was collected during the corresponding month of the previous year.
FBR is being optimistic that the figures of collection received in the treasuries of the remote areas may further swell the revenue figures. On May 30, the governments also approved an additional net package of Rs54 billion to provide cash support and to slash down the electricity tariff for boosting the country’s exports.
In a package announced only a day before the end of its tenure, the government aims to improve the competitiveness of the textile and non-textile export sector to boost its export growth in the coming years.
In a last-ditch political move to woo the traders in the upcoming July 25 general elections, the Ministry of Finance has asked the FBR to prepare a list of claimants who will receive a refund in their taxpayers’ account within 24-hours of the notification.
Despite the fact that these measures only make the industry habitually dependent on the government, a quick-fix like this may improve the situation temporarily but in long run, the industry remains in trouble. The PML-N government had failed to make structural changes and did not make efforts to invest in new value-added sectors/industries.
The government has already been facing the budget deficit of 5.4 % of the GDP, which is revised upwards after the government missed the key targets. Despite the fact that FBR is all set to miss the target figure, the government has increased its expenditure to use the money to persuade business community to vote in PML-N’s favor.
PML-N could have released this amount earlier, but the decision to release the funds at the last moment of its tenure is highly questionable. The expenditure overrun and failure to achieve its targets can further increase the deficit up to 6% by the end of this fiscal year.