Revenue growth in FY22 only because import costs have surged

What year-on-year revenue growth we achieved cannot be called much satisfactory as it was driven by surged import costs, not by the extra effort of the National Board of Revenue.  Keeping pace with the soaring import costs, customs duties, value-added tax and other taxes at the import level have increased.

This, however, has created ultimate pressure on the end consumers as they have to spend extra money to buy products. Riding on taxes at the import level, the NBR achieved 14% growth in the first nine months of the fiscal year, when the economy was in a recovery mood.

Besides, there was little prevalence of Covid-19. If it can achieve substantial growth in income tax and value-added tax at the domestic level, we can call the growth satisfactory.

At the end of the current fiscal year, the growth might increase a little from the current rate. In some years before the pandemic, the growth was 19-20%.

We cannot say the NBR had no effort to increase the revenue. People's earnings and purchasing capacity have fallen. The shock of Covid-19 is yet to recover fully. In such a situation, how can it achieve expected growth if the economy does not return to normal?

What vigour we see in the economy is based on the rich, including the government service holders. But, 80-85% of people who lost their earnings and purchasing capacity are yet to recover. Long queues behind the TCB trucks are the proof.

Apart from the declined earnings, there is huge discrimination in society in terms of financial conditions. As a result, domestic level taxes, including VAT and income tax, have not increased expectedly.

Meanwhile, the NBR is yet to complete the much-sought-after automation of its customs, VAT and income tax departments. Although it worked for that, the pace was very slow. The automation could have increased the revenue with ease of the tax filing and payment processes.

I think there are three key risk factors for the next fiscal year. Firstly, economic activities might continue at a slow pace. Secondly, the impact of the Russia-Ukraine war will have a negative impact, what we have already started to see – price hikes of imported goods and a decrease in the flow of remittance, foreign aid and exports. Thirdly, there is a fear of social instability due to job losses.

Overall, we see a little probability of extraordinary momentum in revenue collection in the upcoming fiscal year.

Muhammad Abdul Mazid, Former chairman, National Board of Revenue