FBR fails to recover Rs29b

Audit reveals amount deducted from clients was not deposited with tax authorities.

ISLAMABAD:

The Federal Board of Revenue (FBR) has failed to recover almost Rs29 billion from various banks and public-listed companies, which deducted the amount from clients but did not deposit it in the kitty – exposing involvement of official agencies.

The amount appears to be just tip of the iceberg, pointed out by the office of the Auditor General of Pakistan (AGP), while conducting performance audit of only four sections of the Income Tax Ordinance, out of 38 pertaining to the withholding tax regime. The withholding tax constitutes almost 60 per cent of total taxes.

AGP has been raising the flag for the last two years but tax authorities are not in a mood to recover the amount and seem more interested in overburdening the already burdened taxpayers to make up for the government’s increasing expenditures.

The government recently levied Rs53 billion in taxes to bridge the gap between the income and spending. The Rs29 billion is even more than what the authorities claim to collect by imposing a 15 per cent flood surcharge and increasing the special excise duty rate by 150 per cent.

According to audit documents, 24 banking companies and national saving centres deducted Rs22 billion from their clients on account of 10 per cent withholding tax while paying dividends. They usurped Rs13.7 billion and only deposited Rs8.3 billion in the kitty, reveal the documents.

The government has also launched a drive to net the tax evaders, targetting to crack down on 700,600 tax dodgers in the initial phase. Nonetheless, Finance Minister Dr Abdul Hafeez Shaikh has recently showed annoyance after coming to know about tax officials who have been found striking underhand deals with dodgers.

The audit department also examined 232 public listed companies who paid cash dividends of Rs145.5 billion and deducted an amount of Rs 14.6 billion as withholding tax. These companies usurped Rs9.2 billion of the clients. The audit is of the view that the amount could have been much greater had it performed the audit on all the resident companies.

In case of cotton ginners, tax authorities showed collection of Rs297 million, which is Rs1.3 billion less than the actual collection, worked out by the audit through calculation of cotton bales. A limited company was also caught evading over Rs1 billion, thanks to corrupt officials of the Federal Board of Revenue. Authorities assessed an oil mill in the presumptive tax regime, whereas being a manufacturing unit it had to be assessed under the normal tax regime.

Highlighting weak administrative control, the audit office said the Federal Board of Revenue even failed to force the withholding agents to furnish statements. On non-compliance, the board charges a nominal penalty of Rs2000 and on default, Rs200 per day. Only on this account the board failed to collect Rs3.8 billion.

Published in The Express Tribune, April 22^nd, 2011.