ISLAMABAD - The provinces would have to pay the price of Federal Board of Revenue’s dismal performance in terms of tax collection that would impact the provinces shares out of the federal divisible pool during ongoing fiscal year.

The FBR is likely to miss the annual tax collection target by wide margin. The FBR had faced massive shortfall of Rs230 billion in tax collection during eight months (July to February) of the year 2018-19 despite introducing mini budgets. The FBR had collected Rs2335 billion during eight months of the ongoing financial year as against the target of Rs 2,565 billion.

“Provinces shares from federal divisible pool always depends on the tax collection of the FBR,” said an official of the ministry of finance. He further said that federal government would slash the provinces share under National Finance Commission (NFC) award if tax collection shortfall does not bridge in the months to come.

The federal government had already transferred 46.3 percent to the provinces in first half (July to December) of the current fiscal year despite facing shortfall in tax collection, he added. The centre has transferred Rs1199 billion to the four provinces, which is 46.3 percent of the annual share (Rs2590 billion) of the provinces under NFC award.

The federal government is bound to transfer 57.5 percent of the resources to the four provinces under the 7th NFC award. According to the NFC award, the federal government has to transfer Rs2590 billion to four provinces during ongoing fiscal year.

The federal government would have to transfer Rs1281.98 billion to Punjab in the current fiscal year. Sindh will have to receive Rs648.8 billion in the FY-2018-19. Khyber-Pakhtunkhwa will receive Rs426 billion in the ongoing year. KP would get one percent under the war on terror. The federal government would transfer Rs233 billion to Balochistan in present fiscal year.

However, the FBR is struggling to achieve the annual tax collection target of Rs4398 billion during ongoing fiscal year despite introducing two mini budgets. Last month, the FBR had requested the government to revise downwards the tax collection target after facing massive shortfall. However, the Finance Minister Asad Umar reportedly had turned down the FBR’s request by not downward revising the target.

This was second time when FBR requested for reducing the tax collection target for current fiscal year. In September 2018, the PTI led coalition government had downward revised the tax collection target by Rs37 billion for the ongoing fiscal year 2018-19 despite taking additional taxation measures.

The previous PML-N government had set the tax collection target for Federal Board of Revenue (FBR) at Rs4435 billion for the current financial year. However, the PTI government had downward revised the target to Rs4398 billion despite introducing additional taxation measures. The government is still struggling to achieve the target despite downward revising it.

The FBR had several times blamed the government’s incentives policies responsible for the massive shortfall in tax collection during July to February period of the year 2018-19.

According to the FBR, reasons for massive decline in tax collection are tax incentives on salaries given by last government, telecom tax suspended by the Supreme Court of Pakistan, reduced tax rates on POL products and slowdown of development programme in the country. An official said that tax incentives on salaries given by the last government and telecom tax suspended by the Supreme Court of Pakistan had caused revenue losses of over Rs50 billion so far. Similarly, reduced tax rate on oil products had also caused loss of Rs70 billion.