Stock Exchange in Shambles, Record Shortfall in Tax Collection
LAHORE: No good news is currently coming from the economic front as a report issued by the Pakistan Stock Exchange listed the last month of April as the worst April in the last 14 years with a drop of 1,865 points in the KSE 100 Index.
It doesn’t stop there as the tax collection has witnessed a record shortfall of Rs345 billion in the first ten months of the current fiscal year. The FBR had collected Rs2.923 trillion, says the State Bank of Pakistan, in the corresponding period of the last fiscal year.
The 10-month collection was equal to 68 per cent of the annual downward revised target of Rs4.4 trillion.
But in an interesting development, the government on Tuesday reduced the General Sales Tax (GST) rates on all petroleum products for the next five days – a move which may be reversed because it won’t be appreciated by the IMF amid the ongoing efforts to reach a deal with the top international financial institution.
The reduction in GST ranges from 17 per cent to 2 per cent in the case of petrol and 17 per cent to 13 per cent for diesel.
When it comes to tax collection, the FBR provisionally collected Rs2 .993 trillion in taxes as against the ten-month target Rs3.35 trillion. However, there can be some increase in the tally once the final figures are available by next week.
Moreover, although the nominal Gross Domestic Product (GDP) growth was 12.5 per cent, the tax collection was grew by mere by mere 2.4 per cent (Rs70 billion).
Amid the failure to boost tax collection, the FBR has reportedly asked the finance ministry to further downward revise its annual target to Rs4.1 trillion.
But some experts say materialising the proposed tax amnesty scheme is essential to meet this target too.
The poor situation of tax collection is going to make it difficult for Pakistan to plead its case for bailout as the IMF delegation is in the country to conclude a staff level agreement for a $6.5 billion package. The international body has been calling for increase in tax collection through abolishing all the concessionary income tax, sales tax and custom duties rates as well as the prohibitive trade measures.
Coming back to the Stock Exchange, the investors lost Rs363 in April with market capitalisation reduced to Rs7,505 from the previous level of Rs7,868. They are now worried about the future prospects given the ongoing talks with the IMF and imminent increase in taxes.