chapter 2.docx

Chapter # 02 Introduction To FBR

Chapter # 02

Introduction to the Organization

2.1: Introduction to Federal Board of Revenue (FBR)

FBR is the largest federal agency of Pakistan that is responsible for the

government of Pakistan regarding imposition and collection of different kinds of taxes.

The Central Board of Revenue (CBR) was created on April 01, 1924 through enactment

of the CBR Act, 1924. In 1944, a full-fledged Revenue Division was created under the

Ministry of Finance. Due to some restructuring functions in July, 2007, CBR was

replaced by FBR.

FBR is the supreme federal agency of Pakistan that is responsible for the government

of Pakistan regarding taxation. The Central Board of Revenue (CBR) was created on

April 01, 1924 through enactment of the CBR Act, 1924. In 1944, a full-fledged Revenue

Division was created under the Ministry of Finance. After independence, this

arrangement continued up to 31st August 1960 when on the recommendations of the

Administrative Re-organization Committee, CBR was made an attached department of

the Ministry of Finance. In 1974, further changes were made to streamline its functions.

Consequently, the post of Chairman, CBR was created with the status of ex-officio

Additional Secretary and Secretary Finance was relieved of his duties as ex-officio

Chairman of the CBR.

To remove further impediments in the exercise of administrative

powers of a Secretary to the Government, and effective formulation and implementation

of fiscal policy measures, the status of the Revenue Division was restored under the

Ministry of Finance on October 22, 1991. It was abolished in January 1995, and CBR

reverted back to the pre-1991 position. However, it was again reestablished on December

SANA ULLAH Internship Report on FBR (RTO) Peshawar Page 7


01, 1998. The Revenue Division continues to exist since then. In the wake of

restructuring of its functions, CBR has adopted new Act under which it has been renamed

as Federal Board of Revenue (FBR) since July 2007.

The Federal Board of Revenue (FBR) is responsible for the

collection of federal tax revenues in the country. It collects both direct and indirect tax

revenues. The direct taxes include Income Tax (IT), Workers’ Welfare Fund (WWF),

Workers’ Profit Participation Fund (WPPF) and Capital Value Tax (CVT). On the other

hand, Indirect Taxes collected by FBR include Sales Tax, Customs Duties and Federal

Excise Duty. The FBR collection from these taxes contributes around 95% of total

federal taxes while remaining relates to surcharges which are too collected by FBR.

FBR is playing vital role in broad based growth of Pakistan’s economy. Its main

objective is to enhance revenues, provide support to the industrial sector by ensuring

availability of raw materials and capital. Moreover, FBR designs policies to promote

local and foreign investment and facilitation of the taxpayers.

Vision To be Modern, Progressive, Effective,

Autonomous and Credible Organization for Optimizing Revenue by Providing Quality

Service and Promoting Compliance with Tax and Related Laws

MissionEnhance the Capacity of the Tax System to Collect Due Taxes through Application of

Modern Techniques, Providing Taxpayer

Assistance and by Creating a Motivated, Satisfied Dedicated and Professional Workforce

Values Integrity Professionalism



Teamwork Courtesy Fairness Transparency Responsiveness

2.2: Functions of FBR

In the existing setup, the Chairman, FBR, being the executive head of the

Federal Board of Revenue, has the following responsibilities:

1- Formulation and administration of

taxation policy.

2- Levy and collection of federal taxes.

3- Quasi-judicial function of hearing of appeals;

4- Enter into double-taxation treaties with other countries;

5- Liaise with all Ministries, Chambers of Trade and Industry as well as

International Organizations.

6- Provide an up-date on FBR activities to the President and the Prime Minister of

Pakistan.

2.3: Organizational Set-up

In the present setup, the Chairman, FBR is assisted by the following twelve

Members distributed along four broad functional categories. Besides this top

tier, senior management also includes various Director Generals and two Chief

Collectors North and South:

A. Operations

i) Customs

ii) Domestic Operations (North)

iii) Domestic Operations (South)



B. Functional i) Facilitation and Taxpayer Education ii) Enforcement and Accounting iii) Taxpayer Audit

C. Policy i) Direct Taxes

ii) Indirect Taxes

iii) Customs

D. Supporti) Strategic Planning and Research & Statistics

ii) Legal

iii) Administration

Figure 2.1



Source: FBR annual report 2007-2008

2.4: FBR Main sources of revenue

2.4.1: Income tax

2.4.2: Sale tax

2.4.3: Federal excise duty

2.4.1: Income tax

If we look at the performance of direct taxes in a historical perspective, the

improved tax effort and effective implementation of tax policy and administrative reforms

has geared up the collection over the years. The share of direct taxes in total federal

tax receipts has increased from around 15% in early 1990s to 32% in FY: 2000-

01(Annual report of FBR,2006-07).

The direct tax has contributed 40% of total tax receipts during FY: 09-10. The net

collection has been Rs.528.6 billion during 2009-10 against the target of Rs. 540.4 billion.

An amount of Rs. 54.2 billion refunds has been paid back to the claimants as against

Rs. 38.8 billion during FY: 08-09 (Annual report of FBR,2009-010).

It may be recalled that the collection of direct taxes includes income tax and other direct

taxes i.e. capital value tax, worker welfare fund and worker profit participatory fund. The

contribution of income tax in total direct taxes has been 95.6% (Annual report of

FBR,2008-09). Therefore, our main focus would be on the income tax in this analysis.

Structure of income tax:

Withholding tax

Voluntary payments



And collection on demand.

2.4.2: Sales Tax

The General Sales Tax (GST) has been one of the major sources of federal

revenue receipts. With the onset of the WTO regime and the consequent changes in

customs duty rates, the reliance on GST has increased manifold.

This is evident from the fact that the share of GST has reached nearly 41% in the

total federal tax collection during FY 04-05 (Annual report of FBR,2004-05).. The gross

sales tax collection of Rs. 294.9 billion and net collection of Rs. 240 billion during July-

June 2004-05 shows an increase of 8.7% and 9.5% over the corresponding period of PFY

respectively (Annual report of FBR,2004-05)..). The narrow base and heavy reliance of

GST on limited commodities is one of the reasons for these wide fluctuations in quarterly

growth.

Sales tax has been the second major revenue generation source of the country

during 2009-10. It constitutes around 65% and 39% of the collection of indirect taxes and

total federal taxes respectively during 2009-10 (Annual report of FBR,2009-010). A

growth of around 14.5% has been recorded in the net collection of sales tax. The

collection is realized from two components i.e. sales tax on imports and sales tax on

domestic sector

Of the two components, ST collection at ‘import stage’ has increased by 15.3%,

which is consistent with the international trade activities. In absolute terms, the net

collection of sales tax at import stage has been Rs. 145.3 billion and the domestic

component of sales tax contributed Rs 94.7 billion. As indicated, the overall growth in

these components was 15.4% and 1.5%, respectively over FY 07-08. A comparison of

quarterly collection of the two components is presented in Graph-1.



Table 2.1

FY 04-05 FY 03-04 FY 04-05 FY 03-04 FY 04-05 FY 03-04ST(D) ST(M) ST(T)

0

10

20

30

40

50

60

70

80

17.2 14.3

33.227.3

50.4

41.6

22.827.3

36.231.9

59 59.2

19.4 22.7

36.6 32.2

56 54.9

35.329

39.3 34.5

74.6

63.5

Q1 Q2 Q3 Q4

(Rs.

in B

illio

n

Graph 1: Quarterly Collection of Sales Tax: FY 09-10 & FY 07-08

Source: FBR annual reports of 2007-2008.

Domestic Sales Tax Collection and Major Revenue Spinners: For further insight,

the growth of ST (D) has been analyzed in the following on the basis of major revenue

contributors. Nearly 72% of (gross) collection has been generated by ten major revenue

spinners during FY 04-05. Incidentally, this share has increased from 62% observed

during the PFY. The quarterly data presented in graph confirms that the growth in

collection of ten major spinners was highest in the first quarter, however, the tempo of

growth dropped from 34% in 1st quarter to 16.7% and 9% in the 2nd and 3rd quarters,

respectively. A rebound was, nonetheless, registered in the 4th quarter. This erratic

behavior in growth has been analyzed in the following when the performance of

individual commodities is discussed. A similar growth pattern has been observed when

all commodities of ST are considered due to simple reason that the ten major spinners, as

pointed out, carry larger weight.



FY:09-10 FY:07-08Difference

Absolute Percent

Ten Major Commodities

Q1 22,738 16,951 5,787 34.1

Q2 26,092 22,354 3,738 16.7

Q3 24,974 22,906 2,068 9.0

Q4 33,196 26,553 6,643 25.0

Total 107,000 88,765 18,235 20.5

Share in Total (%) 71.5 61.6

All Commodities

Q1 33,019 27,330 5,689 20.8

Q2 35,996 39,103 -3,407 -7.9

Q3 34,437 37,220 -2,784 -7.5

Q4 46,145 40,461 5,684 14.0

Total 149,597 144,115 5,482 3.8

. With the help of these measures, the number of registered persons has

increased from 116,686 in 2005-06 to 128,380 in 2006-07 (Annual report of

FBR,2006-07)., showing a growth of 10%.

Comparatively better performance by sales tax on imports against domestic

sector has improved its share in the total collection of sales tax from 45% in 2008-09 to

47.8% in 2009-10 (Annual report of FBR,2009-010).



2.4.3: FEDERAL EXCISE DUTY

Federal excise duties are imposed on goods and services that rendered. Federal

excise duty has been an important revenue generation source of federal taxes. Federal

excise duty has contributed 9.1% of total tax collection during 2009-10 (Annual report

of FBR,2009-010).

Federal Excise Duties (FED): During FY: 07-08, Rs. 92.2 billion has been

collected against Rs. 71.8 billion in the corresponding period last year (Annual report

of FBR,2007-08). The collection has been 28.4% higher than the previous year. In fact it is

the 11 months collection and in this backdrop, the performance of FED has been reasonable.

The tax collection realized has been Rs. 121.2 billion in 2009-10 against

Rs.117.5 billion in 2008-09 yielding a growth of 3.2%(Annual report of FBR,2008-

09)..

Among major items most revenue generator are,

Cigarette has been the top most revenue generator with 36.9%

SED (13.3%)

cement (13.0%)

services (12.6%)

beverages (9.4%)

natural gas (5.1%)

POL products (3.9% (Annual report of FBR,2007-08)

Among major items, cigarette was the top most revenue generator with around 36.9%share

in FED collection, followed by cement (13.0%), services (12.6%), beverages (9.4%)

natural gas (5.1%) and POL products (3.9%). In absolute terms Rs. 72 billion were

collected from major six items. As already mentioned, the reason for nominal or negative



growth was one month lag in FED collection. However, a 42% negative growth in POL

products is due to its shrinking base. On the other hand a robust growth of over 181% in the

head of services confirms a buoyant base for FED revenues.

2.5: NETWORK OF FBR

FBR has,

3 Large tax-payer units

16 Regional tax-payers units

medium tax-payer units

2.5.1: NORTHERN REGION, ISLAMABAD

S.No. Name of the Office Falling Within Jurisdiction

1 LTU, Islamabad

2 RTO, Islamabad

3 RTO, Rawalpindi

4 RTO, Abbotabad

5 RTO, Peshawar

2.5.2: CENTRAL REGION, LAHORE


1 LTU, Lahore

2 RTO-I, Lahore*

3 RTO-II, Lahore*

4 RTO, Multan

5 RTO, Gujranwala

6 RTO, Sialkot



7 RTO, Faisalabad

8 RTO, Bahawalpur*

9 RTO, Sargodha*

2.5.3: SOUTHERN REGION, KARACHI


1 LTU, Karachi

2 RTO, Karachi

3 RTO, Sukkur

4 RTO, Hyderabad

5 RTO, Quetta

2.6: FBR TAX COLLECTION SECTORS

This is the main department of FBR, whose basic purpose is to collect taxes from

different businesses. These sectors determine the different percentage of tax that how

much taxes should be collected from the different businesses. The tax rates are applied by

the FBR. FBR tax collection sector is divided into two main sectors for the collection of

tax, which are as follows:

2.6.1: COMMODITY PRODUCING SECTOR

a) Agriculture

b) Mining and quarrying

c) Manufacturing

d) Construction

e) Electricity and gas distribution

2.6.2: SERVICE SECTOR

a) Transportation and communication

b) Whole sale and retail trade



c) Finance and insurance

d) Ownership and drawing

e) Public adm. and defence

f) Other sources

2.7: TAX COLLECTION PROCEDURE:

FBR formulates and administers the taxation policies, it inflicts and collects all

the Direct Taxes (which include income and corporate taxes, capital value tax and worker

welfare funds tax etc) and Indirect Taxes (which include sales tax, federal excise tax and

custom duty etc).It also offers Quasi-judicial function of hearing of appeals and also

enters into double-taxation treaties with other countries.

So first thing that affects the FBR performance is the natural calamities and

catastrophes that paralyze the economy of the country and so the FBR Collections get

decrease and such areas become exempted from tax for a couple of years which hits the

Taxation system seriously and depleted the collections of FBR.

Second thing that affects the FBR performance is the “its own

administration” corruption, leakage which lead to tax evasion and tax avoidance and such

kinds of error in administration sink bulk of millions of revenue of FBR.

So to control such serious errors, policies regarding reforms are adopted

incessantly and reforms are comprises of motivation concept inside the organization,

application of modern technology, employees training and development, making

Taxpayer Facilitation Portal/Center modern where taxpayers easily can get information

about taxation system, policies, tax rules and regulations, NTN and STRN etc, all these

can be done also online.FBR Online site also makes all taxpayer inform of updates.

FBR has made e-filling mandatory where a taxpayer has to file its return

online to respective RTO within specific period of time, so a taxpayer hasn’t to visit the

building physically and job become easy and time saving for a taxpayer.



2.7.1: CBR Revenue Collection vis-à-vis TargetsOne of the major goals/targets set by the Prime Minister for CBR was

achievement of the revenue target of Rs. 580 billion during FY 2004-05, which was

higher by 11.4% over the actual collection of Rs. 520.8 billion of last year(Annual report

of FBR,2004-05). However, the provisional (net) collection of Rs. 591.1 billion of CBR

for FY 04-05 has not only surpassed the start of the year target of Rs.580 billion, but it

has also exceeded the enhanced revised target of Rs. 590 billion(Annual report of

FBR,2004-05). This commendable achievement has been possible due to broad-based

performance of all the four federal taxes, as there has been a double-digit growth in the

collection of direct taxes, sales tax at import stage, federal excise duties (previously

central excise duties) and customs duties.

One of the major goals/targets set by the Prime Minister for CBR was

achievement of the revenue target of Rs. 580 billion during FY 2004-05, which was

higher by 11.4% over the actual collection of Rs. 520.8 billion of last year(Annual report

of FBR,2004-05). However, the provisional (net) collection of Rs. 591.1 billion of CBR

for FY 04-05 has not only surpassed the start of the year target of Rs.580 billion, but it

has also exceeded the enhanced revised target of Rs. 590 billion(Annual report of

FBR,2005-06). This commendable achievement has been possible due to broad-based

performance of all the four federal taxes, as there has been a double-digit growth in the

collection of direct taxes, sales tax at import stage, federal excise duties (previously

central excise duties) and customs duties.

One of the striking features of this accomplishment is that all the individual

federal taxes have surpassed their respective targets for the year. This achievement has

been possible due to wide-ranging tax policy and administrative reforms initiated in the

late 1980s and being pursued religiously ever since. The recent policy initiatives include:

lowering the tax and tariff rates of capital goods to promote investment and boost

economic activity in the country, reducing the up-front cost of doing business through

automation of business processes – CARE project being the fore-runner in this respect –

discouraging smuggling by reducing tax and duty rates of smuggling prone items,



abolishing distortions in the sales tax regime through the adoption of uniform rate of

15%, continuous reductions in corporate tax rates to cultivate corporate culture,

drastically reducing the litigation burden by withdrawing all frivolous cases and offering

alternative dispute resolution mechanism to the taxpayers, and most importantly, offering

a hassle-free environment to the taxpayers through dedicated tax units and efficient

workforce.

With these changes, the tax structure has been re-engineered in accordance with

the internal best practices where due recognition is paid to the taxpaying capacity of

general population and sectors that are liable to pay taxes under the existing legal

framework. These initiatives aside, it is not out of place to mention that the overall

growth of federal tax receipts has been possible due to overwhelming performance of the

economy and adherence of the Government to the overall macroeconomic policy

framework announced as part of the Medium Term Development Framework.

Table 2.2 A Comparison of Collection vis-à-vis Original and Revised Targets

Original Target

Revised Target Collection

Difference from Revised Target

FY: 04-05

FY: 04-05

FY: 04-05 Absolute Percent

Direct Taxes 181.7 182.7 183.1 0.4 0.2

Sales Tax 249.1 239.5 240.0 0.5 0.2

Federal Excise 46.9 52.8 52.9 0.1 0.1

Customs Duties 102.3 115.0 115.1 0.1 0.1

All Taxes 580.0 590.0 591.1 1.1 0.2

Source: FBR annual report 2003-2004 2.7.2: Collection in FY 2004-05 vis-à-vis Last Year

A comparison of net collection for FY 04-05 and FY 03-04 confirms a healthy

growth of 13.5% in federal receipts(Annual report of FBR,2003-04). In fact, an increase



of Rs. 70.2 billion over last year has been the largest in a single year since FY 47-48,

(Annual report of FBR,2003-04). This increase (in absolute terms) exceeds the

previously recorded highest collection of Rs. 61 billion of FY 03-04 by about 15%. An

important aspect of this growth has been the performance of domestic taxes that is

consistent with strong domestic demand and the overall strength of the economy. It is

relevant to mention that while the growth of the federal tax receipts has been substantial

in absolute terms, it has lagged behind the (nominal) growth of the GDP and thereby the

CBR Revenue to GDP ratio has declined from 9.4 in FY 03-04 to 9 in FY 04-05(Annual

report of FBR,2004-05). A number of factors have contributed towards this decline. The

most significant among them are the performance of those sectors that are fairly lightly

taxed, narrow tax base, administrative weaknesses despite some progress to overcome

them, taxpayers’ unsympathetic perception on how the public funds are being expended,

and the inherent inefficiencies in the system.

Table 2.3 A Comparison of Collection vis-à-vis Last Year’s Collection

Collection Difference

FY: 04-05

FY: 03-04

Absolute Percent

Direct Taxes 183.1 165.1 18.0 10.9

Sales Tax 240.0 219.2 20.8 9.5

Central Excise 52.9 45.6 7.3 16.0

Customs Duties 115.1 91.0 24.1 26.5

All Taxes 591.1 520.8 70.2 13.5

Source: FBR annual report 2004-2005 2.7.3: Achievement in Historical Perspective

The information presented in corroborates that an additional amount of Rs. 70.3

billion in net terms was generated during FY 04-05, which is the highest addition in a

single year in the history of tax collection in Pakistan. Previously, Rs. 60.6 billion was

the additional amount in FY 03-04 and Rs. 56.1 billion during FY 02-03(Annual report



of FBR,2003-04). More interestingly, these three increases individually are greater than

the cumulative increase of Rs. 40.5 billion between FY 95-96 and FY 98-99. This

consistent pattern of significant jump in collection over the last three years is a welcome

development in view of the fact that resource mobilization is directly linked with the

overall economic management of the economy. A shortfall in collection in the past has

not only widened the fiscal deficit, the ultimate impact of the eroding fiscal space was

also felt on the social sectors. This situation has now been reversed.

A further analysis of the 100% accomplishment of the target during the current

and past years confirms that, barring FY 95-96 and FY 99-00 when CBR achieved 99.1%

and 95.8% of the start of year budgetary targets, a much larger shortfall was recorded in

other years. The worst was the FY 96-97 when only 86% of the budgeted target was

met(Annual report of FBR,2002-03). More serious has been the performance on account

of the revised targets – the revised target that were met in only three out of twelve years

since FY 90-91. The main reasons for the dismal performance were: (a) a misplaced

policy of exaggerated projections of key indicators of the economy, whereby it was a

routine to set highly ambitious targets at the beginning of the year only to see them slip

away during the course of the year. Thus, creating macro-management difficulties and

inviting criticism from every nook and corner; (b) inefficient tax machinery with out-

dated, labor intensive and poorly organized work processes and deficient information

technology to support extensive activities, and (c) absence of tax culture in the country

with limited effort to motivate taxpayers to carry-out their legal obligations.

Table 2.4

A Historical Profile of Collection vis-à-vis Targets

(Collection Rs. Billion)

YEARBudget Estimates

Revised Estimates

Collection

Downward Revision (%)

Achievement (%)

B.E. R.E.

1990-91 123.3 120.6 110.5 -2.19 89.6 91.6

1991- 149.5 143.0 139.8 -4.35 93.5 97.8



92

1992-93 174.8 160.0 153.2 -8.47 87.6 95.8

1993-94 190.7 180.3 172.6 -5.45 90.5 95.7

1994-95 259.9 225.0 226.6 -13.43 87.2 100.7

1995-96 270.5 264.8 268.0 -2.11 99.1 101.2

1996-97 328.0 286.0 282.1 -12.8 86.0 98.6

1997-98 324.0 297.6 293.6 -8.15 90.6 98.7

1998-99 354.0 308.0 308.5 -12.99 87.1 100.2

1999-00 362.5 351.7 347.1 -2.98 95.8 98.7

2000-01 430.0 406.5 392.3 -5.47 91.2 96.5

2001-02 457.7 414.2 404.1 -9.5 88.3 97.6

2002-03 458.9

No Revision 460.2 NA 100.3 NA

2003-04 510.0

No Revision 520.8 NA 102.1 NA

2004-05 580.0 590.0 591.1

Upward Revision 101.9 100.2


During2006-07, the revenue organization was able to mobilize resources to the

tune of Rs. 847.2 billion against the target of Rs. 835 billion, entailing higher



collection of Rs.12.2 billion. The (net)collection has been 18.8% higher than Rs.713.4

billion collected during last year, resulting into improvement in Tax/GDP ratio by

0.3 percentage points(Annual report of FBR,2006-07).

2.7.3: Collection vis-à-vis Original and Revised Targets 2007-08;

The fiscal year 2007-08 has been a historic one as the FBR tax revenues

exceeded one trillion rupees mark. The economy has encountered serious shocks

like large scale load shedding, political unrest and higher inflation. Start-of-the-

year challenging target of Rs. 1,025 billion was assigned to FBR and the required

overall growth was 21% over the collection of Rs. 847.2 billion during FY: 06-07.

However, target was revised downward to one trillion rupees for 2007-08(Annual report

of FBR,2008-09).

2.7.4: Collection vis-à-vis Original and Revised Targets 2008-09

Federal Board of Revenue collected the taxes amounting to Rs. 1,161.1 billion

during the year 2008-09. A target of Rs. 1,250 billion was fixed for the year 2008-09 in

the federal budget(Annual report of FBR,2009-010). However, to adjust for the

unprecedented situation at the economic front, the target was revised downward to Rs.

1,179 billion. To reach the target, the overall required growth was 16.9% over the

collection of Rs. 1008.2 billion collected during FY: 07-08(Annual report of FBR,2007-

08). Direct Taxes and Sales Tax have not achieved the target, whereas Federal Excise and

Customs duties have achieved the target. The main reason of shortfall in the collection of

direct taxes & sales tax includes slow down in the economy continued power crises and

political instability.

Table-2.5

Description Original Targets

Revised

Targets

Collection Difference from

Revised Targets



Absolute %age

Direct Taxes 498.9 461.0 443.5 -17.5 -3.8

Sales Tax 469.9 457.0 451.7 -5.3 -1.2

Federal Excise 112.0 116.0 117.5 1.5 1.3

Customs Duties

169.2 145.0 148.4 3.4 2.3

All Taxes 1250.0 1179.0 1161.1 -17.9 -1.5


2.7.5: Comparison of Collection vis-à-vis Original and Revised Targets 2009-10

FBR has collected Rs. 1,328.60 billion (Provisional) during FY: 2009-10, as

against Rs. 1,161.2 billion during FY: 2008-09. The additional revenue added by FBR

has been Rs 167.4 billion during FY: 2009-10, which is all time high in the history of

FBR. The target was achieved to the 96.30% but not the 100%(Annual report of

FBR,2009-010).

Table No: 2.6

Tax HeadsOriginal Targets

Revised Targets Collection

Achievement

of Target (%age)

Direct Taxes 565.5 540.4 528.6 97.9

Sales Tax 499.4 540.3 517.3 95.7

Federal Excise 152.8 134.4 121.2 90.2

Customs Duties 162.2 164.9 161.5 97.9



All Taxes 1380.0 1380.0 1328.6 96.3


Table NO: 2.7

2.7.6: Month wise tax Collection during FY: 2010-11 (Provisional)

MonthsCollections Rs in billion

Direct Tax Sales tax FED Custom Total

July 18.1 40.8 7.3 10.9 77.1

August 26.0 51.6 10.3 12.0 99.9

September

51.6 41.3 9.3 14.2 116.4

October 34.2 46.8 10.2 12.3 103.5

November

32.7 46.2 10.8 13.4 103.1

December

78.3 55.9 10.2 17.2 161.6

January 36.8 46.6 10.6 14.4 108.4

February

37.2 45 9.8 13.9 105.9

March 66.4 48.5 10.6 18.4 143.9

April 49.9 52.3 13.1 14.7 130

May 50 77.5 17.4 17.7 162.6

June - - - - 277.6

Total 1590

2.8: TABULATED DATA:

2.8.1: Revenue Collection in 2004-05 vis-à-Vis:



The historical major targets set by CBR was achievement of the revenue target of

Rs. 580 billion during FY 2004-05, which was higher by 11.4% over the actual collection

of Rs. 520.8 billion of last year(Annual report of FBR,2006-07). However, the

provisional (net) collection of Rs. 591.1 billion of CBR for FY 04-05 has not only

surpassed the start of the year target of Rs.580 billion, but it has also exceeded the

enhanced revised target of Rs. 590 billion. This commendable achievement has been

possible due to broad-based performance of all the four federal taxes, as there has been a

double-digit growth in the collection of direct taxes, sales tax at import stage, federal

excise duties (previously central excise duties) and customs duties.

With these changes, the tax structure has been re-engineered in accordance with the

internal best practices where due recognition is paid to the taxpaying capacity of general

population and sectors that are liable to pay taxes under the existing legal framework.

These initiatives

aside, it is not out of place to mention that the overall growth of federal tax receipts has

been possible due to overwhelming performance of the economy and adherence of the

Government to the overall macroeconomic policy framework announced as part of the

Medium Term Development Framework.

Table 2.8 A Comparison of Collection vis-à-vis Original and Revised Targets

Original Target

Revised Target

Collection

Difference from Revised Target

FY: 04-05

FY: 04-05

FY: 04-05 Absolute Percent

Direct Taxes 181.7 182.7 183.1 0.4 0.2

Sales Tax 249.1 239.5 240.0 0.5 0.2



Federal Excise 46.9 52.8 52.9 0.1 0.1

Customs Duties 102.3 115.0 115.1 0.1 0.1

All Taxes 580.0 590.0 591.1 1.1 0.2

Source:: FBR annual report 2004-2005

The final collection of Rs. 847.2 billion during 2006-07 exceeds the target of Rs.

835 billion by Rs. 12.2 billion or higher by 1.5%(Annual report of FBR,2006-07) . The

feature that FBR has surpassed the start-of-the-year revenue target for the fifth year in a

row is not only encouraging from effective economic management standpoint, it

is even more inspiring as it reflects improved tax management and compliance

without putting undue burden on taxpayers. Nonetheless, it is also pertinent to mention

that in view of the unprecedented performance of income and corporate taxes during

2006-07 and due to sluggish growth of GST and customs duties, the start-of-the-year

targets of individual taxes were revised during the year without altering the overall

target.

The outcome reveals that the net collection of direct taxes has exceeded the

original target by 26.1% and the upwardly revised target has also been surpassed by

4.9%(Annual report of FBR,2006-07). Regrettably, a similar performance could not be

recorded for indirect taxes. Whereas the collection of excise duties exceeded the original

target by 3.9%, it remained short of the revised target by a small margin of Rs. 0.2

billion only. On the other hand, the year-end collection of GST and customs duties

missed the respective original as well as revised targets due to constantly shrinking

base.

Table-2.9

2.8.2: Revenue Collection in 2006-07 vis-à-Vis

Tax Head Revised Collection Difference from Revised Targets



Targets Absolute Percent

Direct Taxes 318.0 333.7 15.7 4.9

Sales Tax (GST)

311.0 309.4 -1.6 -0.5

Federal Excise

72.0 71.8 -0.2 -0.3

Customs Duties

134.0 132.3 -1.7 -1.3

All Taxes 835.0 847.2 12.2 1.5



A comparison of net collection for FY: 07-08 and FY: 06-07 confirms a healthy

growth of 18.9% in federal receipts(Annual report of FBR,2006-07). In fact, an increase

of Rs. 160 billion over last year collection has been the largest in the history of Pakistan.

This increase (in absolute terms) exceeds the previously recorded highest collection of

Rs. 134 billion during FY: 06-07(Annual report of FBR,2007-08). The performance of

all the taxes has been vibrant; federal excise registering a robust growth of 28.4%

followed by sales tax 21.8%. The direct taxes and customs duty have also recorded

healthy growths of 16.1% and 13.8% respectively(Annual report of FBR,2006-07). The

substantial growth in the tax revenues could not keep pace with tax revenue to GDP ratio

that declined from 9.7% in FY: 06-07 to 9.6% in FY: 07-08. This was mainly due to

higher growth in the GDP (mp) than the revenue collection(Annual report of FBR,2006-

07).

Table -2.10

Tax HeadsOriginal

Targets

Revised

TargetsCollection

Difference from

Revised Targets

Absolute Percent



Direct Taxes 405.0 385.0 387.5 2.5 0.7

Sales Tax 382.0 375.0 376.9 1.9 0.5

Federal Excise

98.0 92.0 92.2 0.2 0.2

Customs Duties

140.0 148.0 150.6 2.6 1.7

All Taxes 1025.0 1,000.0 1,007.2 7.2 0.7


2.8.4: Collection vis-à-vis Original and Revised Targets 2008-09

Federal Board of Revenue collected the taxes amounting to Rs. 1,161.1 billion

during the year 2008-09. A target of Rs. 1,250 billion was fixed for the year 2008-09 in

the federal budget(Annual report of FBR,2008-09). However, to adjust for the

unprecedented situation at the economic front, the target was revised downward to Rs.

1,179 billion. To reach the target, the overall required growth was 16.9% over the

collection of Rs. 1008.2 billion collected during FY: 07-08(Annual report of FBR,2007-

08). Direct Taxes and Sales Tax have not achieved the target, whereas Federal Excise and

Customs duties have achieved the target. The main reason of shortfall in the collection of

direct taxes & sales tax includes slow down in the economy continued power crises and

political instability.

Table -2.11

Description Original Revised Collection Difference from



Targets TargetsRevised Targets

Absolute %age

Direct Taxes 498.9 461.0 443.5 -17.5 -3.8

Sales Tax 469.9 457.0 451.7 -5.3 -1.2

Federal Excise 112.0 116.0 117.5 1.5 1.3

Customs Duties

169.2 145.0 148.4 3.4 2.3

All Taxes 1250.0 1179.0 1161.1 -17.9 -1.5



FBR has collected Rs. 1,328.60 billion (Provisional) during FY: 2009-10, as

against Rs. 1,161.2 billion during FY: 2008-09. The additional revenue added by FBR

has been Rs 167.4 billion during FY: 2009-10, which is all time high in the history of

FBR. The target was achieved to the 96.30% but not the 100%(Annual report of FBR,

(2009-010).

Table -2.12

Tax HeadsOriginal Targets

Revised Targets Collection

Achievement

of Target (%age)

Direct Taxes 565.5 540.4 528.6 97.9



Sales Tax 499.4 540.3 517.3 95.7

Federal Excise 152.8 134.4 121.2 90.2

Customs Duties 162.2 164.9 161.5 97.9

All Taxes 1380.0 1380.0 1328.6 96.3


2.8.6: Month wise tax Collection during FY: 2010-11 (Provisional)

Table -2.13

MonthsCollections Rs in billion

Direct Tax Sales tax FED Custom Total

July 18.1 40.8 7.3 10.9 77.1

August 26.0 51.6 10.3 12.0 99.9

September 51.6 41.3 9.3 14.2 116.4

October 34.2 46.8 10.2 12.3 103.5

November 32.7 46.2 10.8 13.4 103.1

December 78.3 55.9 10.2 17.2 161.6

January 36.8 46.6 10.6 14.4 108.4

February 37.2 45 9.8 13.9 105.9

March 66.4 48.5 10.6 18.4 143.9

April 49.9 52.3 13.1 14.7 130

May 50 77.5 17.4 17.7 162.6

June - - - - 277.6

Total 1590


References:

Ahmad Basher (2011), FBR tax ordinance , ed.11th, published by facilitation and



taxpayers education wings, place of publication Pakistan, pp. 198-213

Federal board of revenue,(2011),FBR tax ordinance book ,11th edition, published by FBR,islamabad,pp30-120.

Khan, Shoukat Hayat. (2000,september). FBR Annual Report. Retrieved Aguest 19, 2012, from http://www.fbr.gov.pk

Alam, J. (2011). Analysis of fbr. lahore: Busniess magazine week.

Annual report of Federal board of revenue, RTO Peshawar, FY2002-03.

Annual report of federal board of revenue, RTO Peshawar,FY2004-05

Annual report of Federal board of revenue, RTO Peshawar, FY 2006-07.




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