FBR mulls new avenues to offset oil price shock

KARACHI: The country’s energy-related tax revenues are feeling the squeeze from lower OIL PRICES and the Federal Board of Revenue (FBR) is mulling strategies to offset an expected drop in collections, sources said on Thursday.

In a two-day meeting, Muhammad Ashraf Khan, Member Inland Revenue (Operations), held discussions with the officers of Large Taxpayers Unit (LTU) Karachi and three regional tax offices (RTOs).

Sources in the revenue body said the authorities expressed concerns over the significant decline in oil prices and focused on the collection of sales tax on oil supplies from domestic supplies and imports.

The global OIL PRICES have come down by around 40 percent, while locally the government has so far passed on over 20 percent in price relief, the sources said.

During the fiscal year 2013/14, the FBR had collected Rs506.78 billion as sales tax on domestic supplies in which the share of POL products is around 44 percent.

During the last fiscal year, the sales tax from petroleum products posted significant growth of 28 percent to Rs231 billion from Rs180 billion in the fiscal year 2012/13.

Similarly, at the import stage, the sales tax on POL products constituted 34 percent share of the total Rs495.33 billion. The sales tax on imports grew by 8.5 percent to Rs169.55 billion in the fiscal year 2013/14 as against Rs156.32 billion in 2012/13.

The share of revenue from the petroleum products is almost one-fourths of the entire tax collection. Analysts said petroleum products and natural gas contribute around 53 percent to the total domestic sales tax collected and 10 major items, including petroleum products and natural gas, jointly contribute 73 percent to the total net domestic sales tax collected.

Petroleum products remain the top revenue spinner of sales tax domestically and contributed around 44 percent to total domestic sales tax collection during the last fiscal year.

The sources said during the meeting held on December 17 with the LTU officers, the Member IR, had been informed the dip in sales tax had already been witnessed on the local supplies in November, which would further aggravate in the coming months.

Industry data revealed Pakistan’s oil consumption clocked in at 10 percent on year-on-year basis and eight percent month-on-month lower at 1.57 million tons in November, as the furnace oil sales dropped 17 percent Y-o-Y and 23 percent M-o-M.

The inflationary impact was also discussed at the meeting, which was likely to reduce the sales of companies registered with the LTU Karachi.

The sources said since the LTU Karachi has limited number of big taxpayers, it would be difficult to identify new avenues for additional tax.

However, in the meeting with the officers of the RTOs next day, the members directed to identify new taxpayers for possible revenue generation, the sources said.

The sources said the revenue collection targets would be comfortable during the first half of 2014/15, but it would be alarming in the second half.

The FBR has been assigned the revenue collection target of Rs2810 billion for the fiscal year 2014/15. The revenue body had collected provisional figures of Rs900 billion during July–November, in which sales tax posted only eight percent growth.