With the current assemblies expected to complete their term in May later this year, it is all but natural for each government in the centre and provinces to come up with their laurels. Mostly the laurels are restricted to achievements which are visible like infrastructure projects. However, those projects or achievements that help in development of those marquee projects are seldom talked about. Every government requires revenues in order to undertake recurring and capital expenditure. The recurring expenditure are salaries and maintenance of the government while capital expenditure is something which helps the government in creating projects that generate revenues that allow space for future expenditure. It is most unfortunate that the Federal Government despite tall claims has consistently failed to broaden the tax net and unfortunately has opted for the easier and cosier option of raising internal and external debts. As per the Debt Policy Report 2017-2018 submitted before the National Assembly, there has been a surge of 71% in local debt which stands at Rs 21,407 Billion while the external debt and liabilities stood at USD 83 Billion as on June 30th, 2017. This is extremely a myopic act on part of the Federal Government since the easiest way to carry out development is by borrowing. A more prudent and far sighted Government instead of using this easier route of borrowing would have opted on expanding its revenue generation so that the development is not only sustainable but also independent. Unfortunately, our finance team under Dar did not “dare” to take such bold decisions. The seriousness of this Government on revenue collection can be seen from a news item published in newspapers that FBR has missed tax revenue target by Rs. 74 Billion in the first 7 months of the financial year.
With the above aspect in mind, I would like to talk about the achievements of Sindh Revenue Board which is responsible for collecting province level taxes, duties and other levies and regulating matters relating to the fiscal and related economic policies of the provincial government. Contrary to perception, SRB’s Sindh Sales Tax on Services is levied independently on services rendered by scheduled service providers in the province. In Fiscal year 2017, the Sindh Government reduced the tax rate from 14% to 13%, focusing more on registrations and collection than to squeeze existing tax payers. A point worth noting is that the rate charged in Sindh is lowest when compared to Punjab (16%), KP and Baluchistan at 15% and capital at 16%. By doing this, the revenue generated was 28% higher at Rs 78.6 billion compared to Rs 61.6 billion the year before. With the real goal of SRB to increase the tax net by bringing in services providers that are informal and away from being taxed, there were nearly 5,000 additions in the tax net, taking the total number to 20,910 entities. This was indeed an out of the box proposition and kudos to SRB for implementing it in an effective manner. The end result is that Sindh instead of opting for the easier option of borrowing worked on expanding the tax net and with good planning managed to increase the list of tax payers by more than 35%. Hopefully, the numbers will keep increasing and so would the fiscal independence of Sindh Government. This will further augment the capacity of Sindh Government on developing infrastructure projects as well as projects in the social sector.
One has to be mindful of the fact that tax rate increase is a quick fix but never the ideal fix as businesses tend to move from one place to another to attract lower taxation. The goal is being achieved by effective enrolment and enforcement
One has to be mindful of the fact that tax rate increase is a quick fix but never the ideal fix as businesses tend to move from one place to another to attract lower taxation. The goal is being achieved by effective enrolment and enforcement. With an automated Point of Sale system expected to come online by end of fiscal year 2018, we will be able to see better revenue management by SRB. Let’s face it, no one wants to pay tax on their own. There has to be a proper management and monitoring system, otherwise, the gap between the collection from consumer and the submission to the treasury of the Province will be prone to siphoning. By virtue of this the medium term target is to reach more than 50,000 registrations by fiscal year 2021. The numbers of SRB are better than all other revenue generating bodies of the country. The much talked about and self-proclaimed symbol of good governance, the KP Government had missed its target by about 50% in the last financial year. Let me present a line most used in our households “Agar Kamao Gay Naheetou Khao Gay Kaisey” (if you don’t earn how will you eat?). It is regrettably stated that our Governments whilst spending exorbitantly have forgotten about the most important notion which is its earning capacity. This is indeed a moment to ponder for all of us Pakistanis and this is where the performance of Sindh Revenue Board must be commended for its performance.
The sectors under coverage as per the SRB’s Sindh Sales Tax on Services include Ports, Airports and Terminals, telecom, Insurance, banking services, contract execution, franchise businesses, construction, consultancy, courier, stock brokerage etc. These sectors and services contribute 65% to the total revenue of SRB. Progressively, we are seeing SRB expand the tax net to towns away from the urban centers of Sindh and one can expect further expansion and revenue generation. A heartening point in this is achievement of these targets by a staff of less than 200. A lean government function, SRB is a matter of pride for the Sindh government and should be used as a model for other institutions in our country.
While the entire management of SRB needs to be appreciated, one must applaud the brains behind this structural enhancement in the revenue stream – the people’s government working under the guidance of PPP leadership. Sindh is blessed with major commercial hub, Karachi, however, without an efficient revenue stream, no administration can run. While businesses can complain on overall fiscal measures, they must appreciate that a provincial taxation system gives them more voice in demanding better share of resources and infrastructure. Whether the incumbent government retains power in the Province or not, the future governments will have a well-planned and laid down system that can allow them for better resource generation and utilization in form of capital expenditure which will entail prudent fiscal management.
The writer is a member of the Senate
Published in Daily Times, February 19th 2018.