ISLAMABAD (June 09 2003) : The growth in CBR revenue for 2003-04 would come from 5.7 percent of GDP (CBR's own estimate of GDP growth), and 3.5 percent from inflation, totalling a simple 9.2 percent growth.
An addition through 9.2 percent growth rate would be Rs 506 billion.
The rest would come from other measures. A gross negative revenue impact would be Rs 15 billion that would also be covered for a new Rs 510 billion target.
Member Direct Taxes Wakil Ahmed Khan told reporters after the post-budget press conference that CBR is still sure to achieve Rs 460 billion target for fiscal year 2002-03 and then Rs 510 billion for next fiscal as per the prevailing situation.
These other measures which would help in achieving Rs 510 billion 2003-04 target include Rs 10.25 billion saving during the 2002-03 from the 'no-duty-no-drawback' scheme, namely Duty Tax Remission on Export (DTRE).
This is because when the duty is reduced, the refunds also fall.
The same or more is expected during 2003-04, says the government documents prepared for the Budget 2003-04.
Moreover, those retailers and wholesalers who have not yet paid anything have been asked to pay at 2 percent and get registered.
They are expected to submit with reasonable additional resources.
Then CBR is assured that it would get more income tax paid by banks because they are earning good profit.
The number of taxpayers can be extended with taking only Wapda and KESC commercial and industrial connections at 3.5 million and the returns filed are only 10,25000, which can be brought up to 2 million easily.
Though stress is not much, but credit card holders and car owners would also be brought into the tax net.
These items provide definite information for audit.
Almost Rs 800 million is expected from increase in salaries by 15 percent announced in the budget.
They would pay on average 10 percent on the increased pay, which has estimates of Rs 8 billion on salaries and Rs 2 billion on pensions (pensions are exempt from tax!).
There would be Rs 15.729 billion gross negative revenue impact of various tax concession offered to entrepreneurs.
However, the net revenue impact remains Rs 9.728 billion after a saving of Rs 6 billion from Customs
The CED would lose Rs 4.925 billion, IT Rs 3.848 billion, Customs Rs 2.78 billion.
These all added would make Rs 11.553 billion. While sales tax would add Rs 1.825 billion, it would make a net amount of Rs 9.728 billion.
The negative impact from Income Tax (IT) of 3.848 billion, a major cause of shortfall, is due to last year's decision of enhancing minimum taxable limit of an individual from Rs 60,000 to Rs 80,000.
It had to incur total Rs 3.9 billion revenue loss, out of which Rs 1.5 billion has almost incurred during the current fiscal year 2002-03. A balance of Rs 2.4 billion would incur during 2003-04.
Second setback in IT would be due to expansion of definition of public limited company, whose revenue impact is Rs 300 million.
They were paying 45 percent tax on their income, which was reduced to 43 percent and now for 2003-04 it would be 35 percent.
There are seven such companies, which would now be treated as public limited companies.
These are: Pak-Arab Fertilisers, Pak-Saudi Fertilisers, Pak-America Fertilisers, Pak-Kuwait Investment Company, Pak-Oman Investment Company and Pak-Saudi Investment Company.
Any company having joint venture of Pakistan government and any other government directly or indirectly (through government holding company) would be treated as such.
The withholding tax on indenting commission was reduced from 10 percent to 5 percent but import indenting retained at 10 percent, which this time has now been equated to 5 percent.
This has deferred impact and not a revenue loss actually, but CBR is including it as such in its initial calculations.
The Custom losses due to budget measures have been estimated at Rs 2.78 billion.
The 'no-duty-no-drawback' scheme namely, Duty Tax Remission for Exports (DTRE), has a dent of Rs 100 million.
Cutting duty on 259 industrial raw materials has the impact of Rs 662 million.
Warehousing charges on edible oil has been reduced from 1 percent to 0.5 percent having Rs 150 million revenue loss.
Oilseeds import duty reduction from 20 percent to 10 percent could cause Rs 1.45 billion deficiency in Custom revenue.
Custom duty on tea, spices and others has been reduced having an impact of Rs 568 million.
The central excise duty has an overall Rs 4.925 billion revenue loss. The cut in CED on cement would cause Rs 2.75 billion, CED withdrawal on paper and paperboard would inflict Rs 800 million and wire and cable Rs 720 million.
Rate on natural gas from volume basis to heat basis would reduce revenue by Rs 600 million.
The sales tax has a cost of Rs 4.175 billion of budgetary measures. There would be lump sum payment of Rs 6 billion as sales tax refunds, which used to be paid in instalments.
This payment is considered not a loss because it was also paid earlier. CBR officials are also deducting this Rs 6 billion from the sales tax losses of Rs 4.175 billion and showing a saving of Rs 1.825 billion savings.
Taking this saving and other losses the net comes to Rs 9.7 billion.
CBR would get additional Rs 1.45 billion from sales tax on imported oilseeds after replacement of 10 percent CED with 20 percent sales tax.
Chances for unregistered sale between oilseed extractors and oil/ghee mills saving Rs 5 per kg to extractors would reduce. Dalda and Lever Brothers had to pay almost Rs 14.5 per kg taxes on ghee ultimately, while unregistered extractors in collusion with ghee mills were paying Rs 1-1.5 per kg on oilseeds.
This imposition of sales tax would encourage registration.
Total 350,000 tons oil is sold by oilseed extractors to ghee mills without proper recording and tax evasion is shared between oilseed extractors and ghee mills.