A matter of jurisdiction: Experts on the fence about LGs collecting withholding tax

Local bodies to levy duties on trade, professions

PESHAWAR: Local governments elected in Khyber-Pakhtunkhwa on May 30 will be the first to apply withholding tax, widening the tax net, legal experts say.

The law—the Khyber-Pakhtunkhwa Local Government Act 2013—clearly states in Section 47 that “if a local government levies a tax on professions, trades or callings, it may require the employer of the person liable to such tax to deduct the tax from the salary or wages payable to such person, and on such requisition the amount of the tax due shall be deducted from the salary or wages of the person concerned and credited to the fund of the local government.”

Section 46 in turn empowers the local government to call upon any person to furnish such information, produce such record or accounts or to present such goods or animals liable to any tax as may be necessary for the purpose of determining the tax amount of that person.

FBR

Lawyers, however, say since income tax has been the sole jurisdiction of the Federal Board of Revenue, collection of taxes by a local government may result in double taxation.

Barrister Waqar Ahmad said collection of income tax is not a provincial subject. He pointed out any double taxation would be against the Constitution, even though imposition of taxes by local authority is not without precedence.

“In the past some services taxes were imposed by the town municipal administration and it was upheld by the high court,” he said.

Deduction of taxes at source from salaries by a local government is a new thing, he said.

Doubling

Lawyer Ishaq Ali Qazi told The Express Tribune the provincial government had levied taxes on professionals in the past but there were existing taxes similar in nature and those had to be withdrawn because the new ones resulted in double taxation.

Despite repeated attempts, K-P Minister for Local Government and Rural Development Inayatullah Khan could not be contacted for his comments.

Published in The Express Tribune, May 18^th, 2015.