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Express Tribune
24-05-2025
- Business
- Express Tribune
Budget delayed by a week
Listen to article The government has delayed the presentation of the new budget by over a week due to Prime Minister Shehbaz Sharif's foreign tour to thank friendly nations for supporting Pakistan in the war against India and due to some hiccups in the finalisation of certain heads of expenditures. Sources also said that the government was considering further increasing the existing Rs78 per litre petroleum levy rate to finance an enlarged Public Sector Development Programme (PSDP) for the fiscal year 2025-26, starting from July. The government shelved the plan to present the budget on June 2 and instead decided to unveil the fiscal year 2025-26 outlay on June 10, finance ministry sources said. Accordingly, a scheduled May 26 meeting of the Annual Plan Coordination Committee to approve the next fiscal year's PSDP and macroeconomic targets has also been indefinitely postponed. The development came on the last day of budget discussions with the International Monetary Fund (IMF) on finalising the new budget in line "with the advice of the IMF staff." Speaking to The Express Tribune, Federal Board of Revenue (FBR) Chairman, Rashid Langrial, said that discussions with the IMF would continue virtually during the weekend as well as over the next week. "Constructive and in-depth discussions have been held with the IMF, which will continue over the next week," said Langrial. Matters pertaining to taxation were opened for discussion in addition to the tax target. The FBR's target, the PSDP, and spending on security matters are interlinked. Ahsan Iqbal, Minister for Planning and Development, told The Express Tribune that for the next fiscal year the PSDP budget had been set at Rs1 trillion, Rs79 billion higher than the earlier proposed ceiling of Rs921 billion. Iqbal said that the budget had been delayed due to "limited time after concluding talks with the IMF and because of the Eid holidays." PM Sharif has convened another meeting in Lahore today (Saturday) to discuss budget-related issues before leaving for a four-nation trip on Sunday. Separate meetings were held with the prime ministe and Deputy Prime Minister Ishaq Dar on Friday to finalise next year's PSDP. The coalition partners were demanding large shares in the PSDP, including more allocations for parliamentarians' schemes. Dar on Friday emphasised that PSDP priorities must deliver tangible socio-economic benefits, particularly job creation, poverty reduction, and regional equity, aligned with the prime minister's URAAN Pakistan vision for inclusive, innovation-led growth. The deputy prime minister also chaired the high-level committee for the implementation of the National Fiscal Pact (NFP). The committee aims to facilitate effective implementation of NFP, a major step in addressing fiscal challenges faced by the federal government. The committee deliberated on ways to improve and enhance the federal fiscal resource base. The committee reaffirmed its commitment to NFP while emphasising the resolve to find a viable solution to the current fiscal challenges facing the federal government. Circular debt plan Meanwhile, the IMF has not endorsed the government's plan to retire circular debt in the petroleum sector. The privatisation adviser presented the plan first to the prime minister and then to the IMF on Friday. The government had proposed settling about Rs1 trillion worth of circular debt against higher-than-normal dividends by state-owned companies. These higher dividends were proposed to be utilised for retiring the circular debt over a period of five years. For the next fiscal year, the government had proposed retiring Rs170 billion of petroleum sector circular debt, including Rs19 billion of Pakistan State Oil (PSO). However, there was abnormal movement in the share price of PSO, which increased 133.1% since July last year, despite the company facing serious problems. By comparison, the share prices of financially stable firmsOil and Gas Development Co increased by 57% and Pakistan Petroleum Limited by 45%. The IMF raised queries against the plan and postponed the matter until after the budget for further review. The government has now excluded PSO from the circular debt retirement plan due to serious objections over the abnormal movement in PSO shares, said the sources. They said that the IMF was also unwilling to further increase power subsidies and has asked to cap them at Rs1.04 trillion, equal to 0.8% of the size of the economy. The power division was demanding Rs180 billion more. The finance ministry has also slashed some other subsidies in the next budget to create space for clearing contingent liabilities. PM Sharif will travel abroad from May 25 to visit Iran, Türkiye, Azerbaijan, and Tajikistan. The premier will visit Türkiye and Azerbaijan, where high-level discussions will be held with the respective heads of state. The prime minister is expected to reaffirm Islamabad's appreciation for their vocal support during the India-Pakistan conflict and explore broader strategic and economic cooperation. The final stop of the tour will be in Dushanbe, Tajikistan, where PM Sharif will attend the International Conference on Glaciers.
Express Tribune
03-05-2025
- Business
- Express Tribune
Govt may set Rs14.3tr tax target for next fiscal
Listen to article The government may set a new tax target at over Rs14.3 trillion, which is higher by Rs2 trillion over this fiscal year's downward revised goal and may require at least Rs500 billion in additional measures to achieve it. After working out the new tax target figure for the fiscal year 2025-26, the government has begun the exercise to shortlist measures that it would need to show that the Rs14.307 trillion goal is realistic and achievable. Finance Minister Muhammad Aurangzeb is expected to deliver his second budget speech either on June 2 or June 3 before Eid holidays. The Rs14.307 trillion target is equal to 11% of the next fiscal year's projected size of the economy. A senior official of the FBR told The Express Tribune that the absolute tax target number may change, depending upon the size of the economy but the 11% of the GDP figure would be the target. The development came as the deadline to inform the businesses about accepting or rejecting their budget proposals has lapsed. The government had invited proposals from various chambers and business associations in January with a promise to respond to them by the end of April about how many of those can be realistically accepted. When contacted, Finance Minister Muhammad Aurangzeb said that the review of the budget proposals was underway as these proposals are still coming in. The Rs14.307 trillion for fiscal year 2025-26, starting from July, is tentative and subject to the endorsement by the International Monetary Fund that is visiting Pakistan from May 14th to vet the budget. The Rs14.3 trillion target is 16% or Rs2 trillion more than this year's Rs12.3 trillion downward target, the government sources said. It is also higher than the figure that the FBR pitched to the Finance Minister, which was significantly less than the target that the government wants to set for the tax machinery. For this fiscal year, the government had set the original tax target of nearly Rs13 trillion or 10.6% of the GDP. Due to lower inflation and lower economic growth, the target has downward been revised to Rs12.3 trillion but it remains constant at 10.6% of the GDP. The sources said that the authorities will have to take about Rs500 billion worth new tax measures to make the next target realistic and to end any uncertainty associated with it. These measures would come over and above Rs1.3 trillion additional taxes, which were imposed on the people, mostly on the salaried class, to achieve this year's target. Despite putting an extraordinary burden on the people, the FBR has so far faced the tax shortfall of Rs830 billion, underscoring that the economy's ability to pay more has eroded without broadening the base. What is equal to a mini-budget, the government has already increased the petroleum levy rate by Rs18 to Rs78 per liter under different pretext to offset the impact of FBR shortfall. FBR Chairman Rashid Langrial said on Wednesday that next year's budget would be tough in terms of achieving tax targets, forewarning the people about the upcoming taxation measures. OICCI budget proposals Meanwhile, Finance Minister Muhammad Aurangzeb held a meeting with the Overseas Investors Chamber of Commerce and Industry (OICCI) to discuss its budget proposals. The OICCI was not informed whether any of its proposals would be accepted. The association has suggested the government to withdraw Rs5,000 currency notes to discourage cash economy. The size of the informal economy is estimated at least 40% of the formal economy but the government does not seem serious about cracking down on the informal economy. The OICCI also recommended exempting the chemical dealers from 2% withholding tax that is charged from the distributors on supplies to traders. In an important proposal, the association has also demanded to abolish 10% surcharge on individuals earning Rs10 million or more on compliant taxpayers as it places an unjust burden on regular filers. Pakistan's highly marginalized salaried class paid Rs391 billion in taxes in just ten months. The salaried class paid 10% of the total income tax paid by the entire Pakistan compared to 0.6% paid by blue-eyed traders. The OICCI has recommended the government to exempt up to Rs100,000 monthly income from tax, which is justified demand given the fast eroding purchasing power of the people. It has suggested that in order to retain the number of filers, the government may impose Rs1,000 token tax for incomes above Rs600,000 to Rs1.2 million annual income. It has also demanded tax credit for deductible allowances for housing loans, education, and medical expenses. The OICCI has recommended limiting taxation of company contributions to Provident Fund to 10%, eliminating the Rs150,000 cap. It has also sought specific exemption of capital value tax of% on foreign assets for expatriate Pakistanis returning and foreign nationals becoming resident employees. In a major proposal, the OICCI has demanded reducing the corporate income tax rate gradually from 29% to 25% through an annual 1% reduction to align with other emerging economies. It has sought abolishing the super tax gradually over three years, in the first phase cutting from 10% to 6% from July. The OICCI has demanded abolishing 15% income tax on payment of dividends, which takes the rate to 64% for some companies. The OICCI has also demanded to reduce sales tax to 17%, which the government may not accept due to its major dent on the budget. The association has asked to declare petroleum products as taxable supplies allowing input tax adjustments but the FBR showed reluctance due to the IMF programme. It also rightly demanded reducing tax on packaged milk to 5% from 18% to encourage growth in the dairy sector, enhancing nutrition and affordability for the general public. In another major proposal, the OICCI has asked to restore zero rating of sales tax on local supplies under Export Facilitation Schemes (EFS) by withdrawing 18% GST. The IMF is not in favour of withdrawing this tax. The OICCI has asked to reduce federal excise duty on aerated waters to 18% and juices to 15%, which has adversely affected the growth of these companies.
Express Tribune
30-04-2025
- Business
- Express Tribune
FBR misses target by Rs833b
Listen to article The tax shortfall has ballooned to a staggering Rs833 billion in the first 10 months of the fiscal year, despite the government imposing record additional taxes and reducing refunds. Pakistan's tax chief, Rashid Langrial, as Pakistan's tax chief Rashid Langrial warned that the new budget will also challenging in terms of achieving targets. The shortfall exceeded the limit set by the International Monetary Fund (IMF) by over Rs190 billion. Last month, the IMF acknowledged that the annual target of Rs12.97 trillion was unattainable and subsequently revised it. Only in the month of April, the government added around Rs139 billion in tax shortfall, breaching commitment to the IMF that the shortfall against the original annual target will not be more than Rs640 billion. The Federal Board of Revenue (FBR) provisionally collected Rs9.3 trillion in taxes till end of April, falling short of the target by Rs833 billion, according to its provisional figures. The collection was still around 27% or Rs1.95 trillion higher than the previous fiscal year but not enough to stay on track. In terms of collecting taxes, this and the next fiscal year will be tough, admitted the chairman FBR before the National Assembly Standing Committee on Finance on Wednesday. He further said that this would leave little space for giving any relief in taxes in the budget. "But we are reducing taxes on the salaried class in the budget," said Chairman FBR without disclosing the quantum of relief. As of the end of March, the salaried class paid a record Rs391 billion in taxes, which were 56% or Rs140 billion more than the last year and 1420% higher than the taxes paid by the traders. The FBR sustained a whopping Rs833 billion shortfalls despite putting Rs1.3 trillion additional burdens in the last budget and it even did not spare the milk despite Pakistan being a nutrition deficient nation. The Pakistan Dairy Association (PDA), the representative body of packaged milk producers, on Wednesday sought the intervention of the National Assembly Standing Committee on Finance, to reduce the 18% sales tax on package milk that increased prices by up to Rs70 per litre. The PDA demanded to reduce the tax to 5% but the chairman FBR said that the IMF generally does not allow a reduction in sales tax rate but the government will consider the proposal in the budget. The standing committee recommended reducing the sales tax on package milk, as it was the highest tax rate on milk in the world. There has been over emphasis on increasing taxes, which has shifted the focus away from growing expenditures that are increasing at 24% pace during the current fiscal year, despite low single digit inflation. The Prime Minister has doubled the size of his cabinet, added more departments in an already bloated size of the government and approved to increase salaries of the cabinet members. For the month of April, the FBR's set target was Rs983 billion. However, despite taking advances and slowing refunds, it could collect only Rs844 billion. The FBR paid Rs43 billion in refunds equal to April last year despite collections growing by 29% on a monthly basis. Overall, the 10-month refund payments amounted to Rs428 billion Rs5 billion more than the last year. The IMF compelled the country to impose new taxes, primarily burdening the salaried class and levying taxes on nearly all consumable goods, including medical tests, stationery, vegetables, and children's milk. For the July-April period, the FBR missed its targets for sales tax, federal excise duty, and customs duty but again exceeded the income tax target on the back of over burdening the salaried class. According to the details, income tax collection amounted to Rs4.48 trillion during the first 10 months of this fiscal year, Rs325 billion more than the target. It was also Rs973 billion more than the last year. The burden was shared by the salaried class and the corporate sector, as the retailers and landlords still remained under taxed. Sales tax collection stood at Rs3.17 trillion, whopping Rs775 billion less than the target of over Rs3.95 trillion. The sales tax remained the most difficult area for the FBR and one of the reasons for low collection was less than estimated growth in large industries. The government had immensely increased the sales tax burden in the budget. However, the collection was Rs677 billion more than the last year. The FBR collected Rs602 billion in federal excise duty, Rs157 billion less than the target. But it was Rs149 billion higher than last year. Customs duty collection stood at Rs1.05 trillion, Rs228 billion below the target. The collection is hit by lower-than projected import volumes. It is also marred by manipulation of the goods declaration forms by the importers in connivance with the corrupt elements. It was Rs190 billion more than the last year. Meanwhile, the Pakistan Customs Officers' Association, in a general body meeting, condemned the growing trend of publicly targeting Customs officials without due process. It stressed that accountability must follow legal procedures, rejected media trials, and called for fair recognition of Customs' sacrifices and challenges in combating smuggling.
Express Tribune
18-03-2025
- Business
- Express Tribune
Customs fraud causes loss of billions
Listen to article In a major system breach, importers have tampered with over 10,000 Goods Declaration (GD) forms by altering originally declared quantities and descriptions of goods in connivance with the Pakistan Single Window (PSW) to evade billions of rupees in taxes. The scam has shaken the belief that a GD formthe document carrying details of importing companies, agents, imported goods, and due duties and taxesonce filed online, cannot be altered or changed. The Federal Board of Revenue (FBR) has ordered a post-clearance audit of Transshipment (TP) GD forms, effective from the fiscal year 2022, after The Express Tribune pointed out the massive system breach. The tampering was carried out in collaboration with officers of the PSW, a government-established company responsible for handling trade-related business. To remain undetected, the corrupt network did not alter the Harmonised System (HS) code — a unique numerical identifier for traded goods. However, they manipulated the descriptions and quantities of goods, according to documents reviewed by The Express Tribune. In response to inquiries, an FBR spokesperson confirmed that "HS codes and quantities were changed in the declarations filed at dry ports." However, he added that "nonetheless, these consignments were subjected to physical and documentary scrutiny by Customs at dry ports." The large-scale tampering had been ongoing for years and was uncovered through log edits of these GDs, according to sources. FBR Chairman Rashid Langrial appears determined to dismantle the corrupt network and immediately ordered an inquiry. However, some senior officers attempted to 'technically manipulate' the issue. Initially, FBR officials focused only on cases where HS codes were changed, ignoring alterations in descriptions and quantities. When the issue was raised again, the FBR, on March 13, ordered "a detailed importer-wise analysis of the fields in the Goods Declarations as initially declared at the time of filing the TP GD at the port of origin (Karachi ports) and any subsequent modifications made by the importer or agent at the time of filing the GD at the port of destination (dry ports)." This is the second major scam that has rocked the Customs Department, again involving the PSW. Earlier, a premier intelligence agency uncovered a nexus between 78 corrupt FBR officials and smugglers. Following an Express Tribune story, Prime Minister Shehbaz Sharif ordered the Prime Minister Inspection Commission (PMIC) to launch an inquiry. One of the accused individuals named in the intelligence agency's report currently holds a key position in the Ministry of Finance and has also been summoned by the PMIC. Modus operandi Details show that the importer-PSW officer nexus targeted GD forms originally declared at Karachi port but destined for inland dry ports such as Peshawar, Multan, Lahore, or Faisalabad. The common method of tampering involved declaring at least two types of goods in a GDone subject to a high customs duty and another with a lower duty rate. At the final stage, the quantity of the high-duty item was drastically reduced, while the low-duty item's quantity was increased proportionally to maintain the total weight of the consignment. For instance, a transshipment GD was filed in Karachi on November 26 last year, ending in digits 173, and its home consumption transshipment was filed in Azakhel, Peshawar. The estimated tax evasion in this single case is Rs13.9 million. Similarly, another GD, ending in digits 123, was filed on the same date in Karachi with two declared items. The estimated revenue loss in this case is Rs14.2 million. Sources revealed that thousands of such cases exist, and a deeper investigation could expose the full extent of the fraud. On August 7, a GD ending in digits 026 was filed in Karachi. The TP declaration was manipulated, reducing the actual weight of a heavy-duty item from 10,000 kilograms to just 100 kilograms. This manipulation resulted in an estimated duty and tax evasion of approximately Rs12 million under HS Code 5804.1000. Sources disclosed that, a few years ago, the data source code was transferred from Pakistan Revenue Automation Limited (PRAL)an FBR data subsidiaryto the PSW. They explained that such tampering would not have been possible without the active involvement of individuals with system controls at PSW. The government had set up the Single Window company to handle tasks previously managed by Pakistan Customs. Employees in this company receive hefty salaries, and many were hired from Pakistan Customs. FBR's response An FBR spokesperson stated that importers exploited a system glitch to evade duties and taxes. However, after customs assessment at destination dry ports, the collected duties and taxes were found to be higher than the declared amounts. To ensure no revenue loss, the Customs Wing has directed the Post Clearance Audit wing to review all affected GDs. The spokesperson confirmed that HS codes and quantities were altered in declarations at dry ports, but the consignments still underwent physical and documentary scrutiny by Customs. Under the standard transshipment GD process, the initial declaration's contents cannot be changed when converting a TP GD to a home consumption GD at dry ports. Each dry port's customs administration is legally bound to verify declarations against actual imported goods. Customs officers have access to the original TP declaration, but scrutiny only intensified after The Express Tribune exposed the scam. A review of data found that fewer than 2% of total TPs filed over the past five years showed discrepancies. However, changes were made by importers before customs assessment, meaning GDs were verified before clearance. The FBR claims to have fixed the glitch and has ordered an audit. If adverse findings emerge, the audit scope may extend back to 2015.
Express Tribune
14-02-2025
- Politics
- Express Tribune
Govt orders inquiry into smuggling
Listen to article ISLAMABAD: The government has ordered a fact-finding inquiry after an intelligence agency uncovered a network of 78 alleged corrupt Customs officers and smugglers involved in smuggling goods from Quetta to Punjab and Islamabad. Some individuals identified in a report by one of Pakistan's premier intelligence agencies hold key positions in the federal setup, revealed government sources. A top Federal Board of Revenue (FBR) official confirmed the development to The Express Tribune. "The Chairman of FBR, Rashid Langrial, has ordered the Member Customs to launch a fact-finding inquiry into the affairs of various officers and officials of Pakistan Customs, as well as certain private individuals (of the smuggling network) based on a source report received in his office," a senior FBR official said. The Express Tribune had sent separate questions to both the FBR and the Ministry of Finance, but neither responded officially. The top tax official further said that the inquiry would be led by Chief Collector of Customs Enforcement Basit Maqsood Abbasi, who will be assisted by another officer. Concerns about the impartiality of the inquiry have emerged, as some of these officials hold significant positions. The FBR official said that at this stage, it is a fact-finding inquiry, which is expected to conclude by the end of this month. The official added that further action will be taken once the fact-finding report is finalised. When asked whether the chief collector could ensure a fair inquiry, given that some accused individuals hold critical positions, the FBR official stated that the head of the inquiry has a strong reputation and cannot be influenced. The FBR official also mentioned, "The source report is reportedly based on confessions made by certain officials and smugglers who had previously been apprehended and investigated by the agency." Sources expressed concerns that the proceeds from the crime might be parked outside Pakistan through members of the network. However, it remains unclear whether the Customs official-headed inquiry will extend to investigating these allegations. Another government official remarked that the matter could be handed over to an agency with the resources to conduct investigations both inside and outside Pakistan. Thirty-seven allegedly corrupt Customs officials and 41 smugglers have been identified as part of the network, which is said to have smuggled various goods, including cigarettes, tyres, and clothes, from Quetta to major consumption centers in Punjab. Independent studies have suggested that cigarette smuggling alone is causing Rs250 billion ($900 million) in revenue losses. Sources noted that the FBR and the military establishment have jointly initiated an effort to tackle smuggling, which is severely damaging the economy and undermining domestic production. The government is also in the process of setting up new anti-smuggling posts along the Indus River as part of its ongoing anti-smuggling campaign. The top FBR official revealed that a journalist was also named in the network, which predominantly operated in Punjab. Last year, the FBR had appealed to the public to refrain from using smuggled items, as such goods negatively impact the sale and purchase of local products, thereby harming the country's economy. The involvement of FBR officials in the smuggling network raises serious concerns about the extent of the network's penetration within the country, which could undermine the civil-military efforts to combat illegal trade. Due to a mismatch between the assets and income sources of civil servants, the International Monetary Fund (IMF) has imposed a condition requiring the FBR to make public the income tax returns and wealth statements of civil servants and their spouses. The global lender has called for a risk-based verification of the information disclosed by civil servants, with possible penalties and investigations for officers whose assets exceed their declared income sources, according to government sources. However, due to a narrow definition of "civil servant," it is estimated that only around 25,000 civil servants' assets will be disclosed even after amendments to the Civil Servants Act as part of the IMF's condition for the $7 billion package, the sources added. Officers of autonomous bodies, regulatory bodies such as the State Bank of Pakistan, the National Electric Power Regulatory Authority, the Oil and Gas Regulatory Authority, the Pakistan Telecommunication Authority, and provincial civil services will remain exempt from digitally filing returns and their subsequent public disclosure. According to an article by Ali Salman, the Chief Executive of PRIME, the overall loss to the national exchequer from illegal trade, smuggling, and tax evasion could range between Rs1.5 trillion and Rs2 trillion. According to the Transnational Alliance on Combating Illicit Trade (TRACIT), Pakistan ranks 72nd out of 84 countries on the "Global Illicit Trade Environment Index," published by the Economist Intelligence Unit.
