ISLAMABAD: Special Assistant to the Prime Minister on Revenue, Dr Waqar Masood Khan has obtained his first briefing from the Federal Board of Revenue (FBR) on key issues including major reasons behind the decline in tax-to-GDP ratio to 9.6 percent in 2019-20, sales tax refunds, organisational structure of the FBR, and ongoing reforms in the tax administration.

Sources told Business Recorder here on Wednesday that Dr Waqar Masood Khan had asked the FBR to explain among others the following areas: (i) Reasons for low tax-to-GDP ratio (ii) presentation on refunds; (iii) organisational structure of the FBR including number of tax officials and officers (iv) progress on the World Bank-funded project (Pakistan Raises Revenue); (v); revenue generated from Rs637.4 billion taxation measures taken in budget (2019-2020), and (vi) reforms in the tax administration.

According to the sources, FBR Chairman Javed Ghani and his team of members have briefed the Special Assistant to the Prime Minister on Revenue, on the latest refund position and major causes for decline in the tax-to-GDP ratio in 2019-20.

Tax officials informed that at time of allocation of target to the FBR, it was estimated that impact of Rs637.4 billion would be witnessed in 2019-2020 with respect to policy measures introduced through the Finance.

However, due to factors not foreseen at the time of target allocation to the FBR, in certain areas, some external factors beyond the control of the FBR have occurred during the period under review, resulting in less collection.

Some of these factors are import compression.

The imports compression by around six percent has resulted in shortfall of sales tax collection at import stage which grew by just 7.2 percent; withholding tax at import stage has also been affected negatively, and collection fell by 10 percent, and customs duties and the Federal Excise Duty (FED) at import stage has also been affected, whose collection declined by nine percent, and 22.4 percent, respectively.

Tax officials have informed that the FBR had reported a net revenue figure of Rs1,004 billion exceeding the given target of Rs970 billion by a margin of 34 billion.

Income tax collection for the quarter stood at Rs358 billion.

Similarly, collection of sales tax, federal excise duty and customs duty remained at Rs426 billion, Rs56 billion, and Rs164 billion respectively.

The gross revenue stood at Rs1,052 billion.

This is despite the fact that during the 1st quarter of the current fiscal year, refunds to the tune of Rs48 billion against only Rs26.5 billion last year have been issued, which has greatly helped boost the economic activity in the country.

During 2019-20, the refunds of around Rs. 173.5 billion were paid as compared to Rs.121.6 billion paid in 2018-19. The refund amount paid during 2019-20 was Rs.52 billion higher as compared to previous fiscal year.

The revenue target for 2020-21 has been fixed at Rs. 4,963.0 billion. The required growth is 24.2% over the collection of Rs. 3,997 billion during 2019-20. In absolute terms, Rs. 966 billion additional amount is required to be collected in 2020-21.

Tax authorities have informed the special assistant to the prime minister on revenue that the tax-to-GDP ratio has been projected at 10.9 percent in 2020-2021.

There is a vital role of the FBR in the economic development of the country.

The FBR collects more than 90 percent of the overall tax revenues, is trying to enhance its tax base and net, in order to increase its tax-GDP ratio with the scheme of reforms and enforcement.

There is a need to boost up the efforts and implement these reform measures for efficiency and sufficient raise in the FBR tax revenues, the sources added.