I T H the next IMF review mission due later this month, i he FBR appears quite eager to bridge the tax shortfall of Rs345bn during the first seven months of the present fiscal year. Even though a robust growth of 16pc in the FBR`s January tax collection was well above its six-month average of 10-11pc, and offers hope for some improvement over the remaining five months of the current year, the revenue target deficit will not be possible to bridge through normal collection.

However, the recent Federal Constitutional Court ruling, which struck down over 2,200 pending cases against the super tax and paved the way for the recovery of an estimated Rs217bn in unpaid arrears, has handed the FBR a big opportunity to narrow its widening collection gap. And its field formations are actively pursuing this avenue since the decision. While most businesses received notices for immediate payment, many complained that tax officials had threatened them against missing the deadlines unilaterally conveyed to them.

It is against this backdrop that the FBR chairman, while testifying before a Senate panel on finance and revenue, has sought to temper fears by expressing willingness to allow companies instalment-based payments by the end of this fiscal year. His assurance that the government did not want to shut down businesses for the sake of tax recovery is welcome. So too is the acknowledgment that recoveries could be handled on a caseby-case basis. However, that is not enough. No taxpayer disputes the FBR`s authority to recover the super tax liability following the FCC judgement -unless altered in a review. The issue here, though, is not whether the tax should be paid, but how. The tax authorities must realise that the pending super tax amounts were not sitting idle in bank accounts. They were absorbed into working capital and investment decisions over many years. More importantly, the FBR should recover the arrears after adjusting pending refunds of taxpayers where applicable in instalments as promised by the FBR chief. Such a framework should align the FBR`s revenue needs with business cash flow needs and minimise disruption. Forcing large, lump-sum recovery risks choking liquidity at a time when firms are already grappling with high financial costs, elevated energy prices, weak domestic demand, and last but not the least, an excessive tax burden.