ISLAMABAD: The Federal Board of Revenue (FBR) has decided to abolish 25 different withholding taxes in the upcoming budget 2019-20, it is learnt.
“The FBR is contemplating upon options to reduce numbers of WHT by 50 percent bringing it down from existing 50 to 25 in totality in the upcoming budget,” top official sources in FBR confirmed to The News here on Wednesday.
Official data shows that there are some withholding taxes where the FBR is collecting negligible amount as the tax machinery has so far collected zero amount from advance tax on extraction of minerals under section 236 V, Rs1.23 million from collection of tax by Pakistan Mercantile Exchange Limited under section 236 T and meager amount of Rs0.24 million from foreign produced TV plays and serials under Section 236 E of Income Tax Ordinance 2001 during the outgoing financial year.
The FBR has found that around 7 to 10 withholding taxes contributed to 85 percent collection under this head out of total number of taxes standing at 50.
The FBR has so far collected Rs800 billion in shape of withholding taxes in the current fiscal year and the Board is considering to abolish almost half of existing WHT in a bid to ensure ease of doing business in Pakistan. The FBR now intends to abolish all those WHT where it is causing impediments and resulting in cost escalation.
“The government has decided to keep major revenue spinners of withholding taxes intact in the coming budget. All those WHT will also continue that are used as tool for documentation of economy,” top FBR officials confirmed to The News here on Wednesday.
The analysis done by the tax machinery showed that the FBR generated major chunk of withholding taxes from imports, salaries, dividend income, payment to non-resident, payment for goods, services and contracts, exports, electricity consumers, income from property, cash withdrawal from banks and purchase/transfer of immoveable property and others.
On imports, the FBR has collected Rs200 billion so far in the current fiscal year from July 2018 to mid-May 2019. The withholding tax collection from salaries component slashed during the outgoing fiscal year because the last PML-N government jacked up taxable income ceiling from Rs0.4 million to Rs1.2 million in one go but that had resulted in nosedive of collection on account of WHT from Rs110 billion in last fiscal to Rs62 billion so far in the ongoing financial year, witnessed around 45 percent decline.
The dividend income so far stood at Rs47 billion in the current fiscal year against Rs50 billion in the same period of the last financial year. The WHT on account of profit on debt increased to Rs50 billion so far in the current fiscal year against Rs38 billion in the same period of the last financial year. The withholding tax on payments to non-resident went up by 80 percent and stood at Rs29 billion so far in the current fiscal year.
The withholding tax on payment for goods, services and contracts fetched collection of Rs185 billion so far in the current fiscal against Rs215 billion in the same period of last fiscal year. The income from property has gone up to Rs18 billion, prizes and winnings Rs12 billion, sale of POL products Rs7 billion, cash withdrawals from banks Rs26 billion, electricity consumption (commercial & industrial) and purchase/transfer of immoveable property Rs11.4 billion.
(This news/article originally appeared in The News on May 30th, 2019)