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Thursday, February 15, 2024

PTI forgot Tax lessons they preached to PML-N

PTI promised a surge in tax collection if and when they to power and now when they had to prove their mettle, they seem to be falling short. Tax collection is at lowest and PMLN leaders who PTI criticized are schooling the government on the lessons they preached.

Mohammad Zubair |

The first fiscal year under PTI government closed June 30th with bad news all around. Just focusing here on one key item and perhaps the most important- tax revenues.

Let’s look at the results

1: Total tax revenue collected by FBR is Rs 3820 billion.

2: Instead of registering any growth, the tax revenues have even fallen short of last year.

3: That is why it is the slowest revenue collection record for the last 21 years.

4: Under 5 years of PML-N rule, tax revenues doubled from 1900 billion to more than 3800 billion (in spite of the fact that June is the best month for collection while PML-N left the government at the end of May 2018).

If PTI cannot even make a correct projection for 3 months, how do we believe this leadership will be forecasting properly for the next 2-3 years

5: The original target for tax collection given by PML-N during the budget speech in May 2018 was Rs 4435 billion. This was revised downwards by PTI in its supplementary budget in September 2018 to Rs 4398 billion. It was the first shock we got from the new government. PTI had been critical of all previous governments especially PML-N for extremely low tax collection and had promised, by Imran Khan, that tax revenues would be increased to Rs 8000 billion within 1-2 years. And here they were making their first projection and revising the target downwards.

So against this target set by PTI itself, there’s a shortfall of Rs 578 billion – a staggering amount.

6: Just for information, tax collection should have increased by a minimum of 12% – considering 9% inflation and adding 3% for GDP growth. A 12% increase would have meant, in real sense, no growth. So in spite of high inflation and massive devaluation, negative growth is a reflection of extremely poor and incompetent tax management.

7: Subsequently around Feb/March in budget papers, a new figure was reflected – Rs 4150 billion. There’s a shortfall of Rs 330 billion against the 3rd time revised figure.

If you cannot even make a correct projection for 3 months, how do we believe this leadership will be forecasting properly for the next 2-3 years.

8: The other impact is declining Tax to GDP % which has come down from 11.1% under last year of PML-N government to 9.9% – the worst in 6 years. The target was 11.4%.

Read more: Naya Pakistan: PM Khan urges the nation to pay taxes

9: The failure to achieve its revenue target has resulted in a massive increase in fiscal deficit – again something that PTI used to criticize. Against its own set target of 5.1 %, the fiscal deficit will reach close to 8%. Reason – a massive shortfall in revenue numbers and a significant increase in expenditure. Just for our PTI friends, this massive deficit will lead to borrowing on a scale never witnessed in our history.

10: The other negative implication of lower tax collection is the amount that will be distributed to provinces. Under NFC award, provinces receive approximately 58% of the amount collected and provinces then spend this money on education, health care, public transportation, water management, road network & other infrastructure. All these sectors will suffer badly because of the incompetence of PTI’s federal government. The provinces had become used to a growth of 20% in tax revenues on an annual basis. Like all other areas, a complete disaster by the ‘Tabdeeli Sarkar’.

After all this rather than being embarrassed, we saw the Prime Minister Imran Khan sitting and blaming the previous governments for tax mismanagement.

And most interestingly, the person responsible for tax management has got a promotion.

Mohammad Zubair Umar served as 32nd Governor of Sindh. A member of the Pakistan Muslim League (N), and he served as the Chairman of Privatization Commission of Pakistan with the status of Junior Minister. He also served as Chairman Board of Investment under Nawaz Sharif government.

The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.