ISLAMABAD: Sales tax remained the main contributor to revenue with a 41.5% share in total Federal Board of Revenue (FBR) tax collection in the first half (July-December) 2020-2021, followed by direct taxes with 37.6%, customs duties 15.3% and the share of the federal excise tax (FED) of 5.6%.

According to the RBF report released on Wednesday, the shares of tariffs and EDFs have fallen slightly.

The reason for the drop in the share of tariffs is also attributed to the Covid-19 exemptions on medical equipment in July 2020, which were around 3.7 billion rupees.

Likewise, the FED collection has been affected due to the drop in air travel income of Rs 14.3 billion in the first six months of 2020-2021. In addition, the recovery of the withholding tax at the import stage was reduced by approximately Rs. 15 billion during the period under review.

Despite some recovery, the negative impact of Covid-19 on the national economy is preventing economic indicators from growing to their full potential, which has a negative impact on tax collection.

There are challenges related to Covid both nationally and internationally for tax collection.

Over 40 percent of RBF revenues depend on domestic imports, so any import issues would affect taxes on international trade accordingly.

In the first half of 2020-2021, dutiable imports registered a negative growth of 1.1%, thus limiting the growth of tariffs to around 3%.

The compression of imports has affected the collection of other import-related taxes such as sales tax, FED and withholding taxes at the import stage. The collection of the holdback at the import stage amounted to Rs 91 billion, approximately Rs 15 billion less than the Rs 106 billion collected in the first half of 2019-20. Petroleum products at the import stage recorded negative growth of 14 percent, which reduced sales tax collection at the import stage to Rs 18 billion.

The negative growth in the collection of the sales tax on machinery and organic chemicals affected the collection of around 5 billion rupees.

Likewise, the collection of customs duties was also affected mainly due to the negative growth in the collection of petroleum products), machinery and paper and cardboard.

The negative impact of these three elements was approximately 7 billion rupees.

In the domestic sales tax, the collection of petroleum products, especially petroleum refineries and petroleum exploration, decreased by 14.7% and 7%, reducing the collection by around 15 billion rupees.

The FED collection on air travel has been reduced by 14.3 billion rupees in CFY’s first six months due to the pandemic.

The higher repayments, by around 79 billion rupees or (105% above) compared to the first half of 2019-20, were made to facilitate the business community as a policy tool of the government, in order to boosting the success of Covid businesses and economic activities in the country, the FBR report added.

Copyright recorder, 2021

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