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July-March fiscal year 2014: FBR raises WHT demand of over Rs 32 billion

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  • Tanzil Faisal And Co
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  • April 4, 2014

July-March fiscal year 2014: FBR raises WHT demand of over Rs 32 billion

Date: April 04, 2014

The Federal Board of Revenue (FBR) has raised withholding tax demand of over Rs 32 billion
during July-March 2013-14, which would result in substantial recovery of billions of rupees
through effective monitoring and audit of withholding agents. Sources told Business Recorder
here on Thursday that the Directorate General of Withholding Taxes had made huge tax demand
of Rs 32 billion against the withholding agents during the period under review.

This amount would further increase in the remaining period of 2013-14. Out of this tax demand,
the Directorate is expected to recover withholding tax to the tune of rupees billions. Directorate
General of Withholding Taxes had recovered over Rs 19 billion through audit of withholding
agents including banks, Pakistan Post Office, government departments, private and public
limited companies and other agents during January-June 2012. The directorate had passed orders
against the withholding agents under section 161 (failure to pay tax) and section 205 (default
surcharge) of the Income Tax Ordinance 2001 for recovery of due amount during the period
under review.

The recovery of Rs 19 billion indicates the huge potential of withholding taxes and audit of
withholding agents can substantially increase revenue. The withholding tax is a sustainable tax as
once this tax has been imposed, its collection become easier through enforcement and audit. The
withholding tax is easy to collect for which education of the withholding agents as well as payee
is needed at national level. Keeping in view the past recovery from withholding agents, the
potential would be further explored and successful audit of such agents would also results in
withholding tax audit of other withholding agents, sources maintained.

In most of the cases, the tax was deducted but not deposited by the withholding agents in the
national exchequer. In other cases, the tax was not paid or not deducted by the withholding
agents. Recently, the Board has ordered withholding tax audit of the corporate sector employers
to check whether withholding tax was accurately deducted from salaries paid by the employers to
employees working in corporate entities and companies. In this regard, Large Taxpayer Units
(LTUs) and Regional Tax Offices (RTOs) are monitoring short-deduction in corporate sector
under section 149 of the Income Tax Ordinance, 2001 through system audit. The purpose of the
whole exercise is to recover the defaulted amount of withholding tax from the corporate sector in
cases where employers failed to fully deduct the amount from salary under section 149 of the
Income Tax Ordinance 2001.

The withholding audit under section 161 and section 205 of the Ordinance 2001 remained a
priority of the FBR as this is one of the important sources that helped increase collections. It has
been observed that in the last two years withholding taxes in respect of corporate salaries under
section 149 remained a neglected area. There is a need of focused withholding audit of salaries
of corporate sector which can yield significant revenue, they added.

Business Recorder

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