ISLAMABAD: The Federal Board of Revenue (FBR) has noted a drastic reduction in the receipt of withholding taxes imposed on the supply and contracts of goods and services from some agents for the July-December period of the ongoing fiscal year.
The overall revenue collection has dropped by Rs287 billion, which has also been impacted by poor collection of withholding taxes. Between July and December 2019, over 50 withholding tax agents reported a reduction in collections ranging from 2% to 99%, the FBR revealed.
Taking notice of the situation, the FBR has directed its field formations to take legal action and impose fine on the withholding tax agents who have not submitted their collections as per the increased tax rate specified in the budget.
According to a report of the FBR, a copy of which is available with Daily Express, the overall collection of withholding taxes in July-December 2019 was up 19.9% with only December reporting a 14.1% increase.
However, a large number of withholding tax agents reported a drastic decrease, which included tax collection by the stock exchange registered in Pakistan, advance tax on private motor vehicles and cash withdrawal from banks to name a few areas.
According to the document, the withholding tax collection for the July-December period totalled Rs532.38 billion, up 19.9% from the Rs444.04 billion collected in the previous year. The collection in December totalled Rs91.313 billion, up 14.1% from the Rs80.04-billion collection in December 2018.
No withholding tax collection could be made on the issuance of bonus shares by listed companies while Rs115.12 billion was collected in withholding taxes on imports, down 4.6% from the Rs120.69 billion collected in the previous year.
Similarly, tax collection on payments made by non-residents totalled Rs15.2 billion, down 1.9% from Rs15.44 billion in the corresponding period of previous fiscal year.
Tax collection on bank withdrawals totalled Rs6.86 billion, down 56.4% from Rs15.73-billion collection made between July and December 2018. The stock exchange contributed Rs4.7 million in withholding taxes, which was 99.1% lesser than the collection of Rs534 million in the previous fiscal year.
The FBR has identified the withholding tax agents who have underreported collections and has sent their details to its Regional Tax Offices (RTOs) for further action.
The FBR has directed all its chief commissioners, Large Taxpayer Units (LTUs) and RTOs to scrutinise the withholding tax agents who have reported lower collection in the half year ended December 2019.
Tax authorities have been advised to ascertain the causes behind the poor withholding tax collection compared to the same period of the preceding fiscal year. The authorities have also been directed to ensure the collection of outstanding taxes from the withholding tax agents by the end of this month.
As per a letter sent by the FBR to all regional offices and field formations in Karachi, Lahore, Islamabad and other cities, all LTUs, RTOs and chief commissioners for Inland Revenue have been directed to ensure strict monitoring of tax collection as per Section 153 of the Income Tax Ordinance 2001.
The tax authorities have been directed in the letter to ensure enforcement and coordination in respect of withholding tax collection.
Zonal commissioners have been directed to identify the shortfall in the withholding tax collection in their respective jurisdictions and ensure that the outstanding receivables collected by the agents are deposited with the FBR by the end of this month.
Published in The Express Tribune, January 8th, 2020.
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