The Federal Board of Revenue (FBR) has decided to use withholding taxes as a major source of documentation for broadening the tax base.
Sources told Business Recorder on Tuesday that the FBR strategy to broaden the tax base included utilisation of companies' data registered with the Securities and Exchange Commission of Pakistan (SECP); property; PTCL/mobile phone data; motor registration authority; vehicles and data of stocks/shares. Apart from these areas, withholding taxes would also be used as a means of documentation rather than just a source of revenue.
In the past, the FBR has used different software for broadening the tax base. The Chief Co-ordinator and designer of Integrated Tax Information System (ITIT), late Qudrat Ullah, had devised ITIT to broaden the tax base. The scattered data was organised using search engines of ITIT. The data sources for ITIT included NTN, tax return data for the last three years, tax payment/receipt data for the last ten years, survey data, motor vehicles data, utility agencies data and telecommunication data.
Later, new versions of 'National Integrated Tax Information Trekker' known as 'Nexus' was devised for exchange of information on taxpayers registered sales tax, income tax and customs departments. The 'Nexus' also contain updated information from various internal/external sources including National Tax Numbers (NTN), motor registration authority, tax return data, utility agencies, tax payment receipts, PTCL/mobile phone data and survey data.
Sources said that the board wanted to incorporate maximum data of taxpayers including the information available with 40 major withholding agents and banks into the 'Nexus' 'Data Warehouse' to bring un-registered persons within the tax net. The board is making necessary arrangements for the development of a third-party database to broaden the tax base.
Sources said that the withholding regime covers some of the provisions regarding utilities and deduction mechanism based on bills such as electricity, gas and telephone bills. Some of the countries have developed special software for analysis of billing based information as contained in the Statements and Returns. Such software meets computational needs of withholding agents by providing accurate and consistent calculation. The Board had declared 2,300 public sector development projects as withholding agents for collection of withholding tax from this major non-compliant area under various provisions of the Income Tax Ordinance 2001.
Withholding agents/authorised persons to collect/deduct the tax at the time of making the payment included person defined as company ie companies public/private/corporations)/co-operative societies, registered trusts and other taxable categories and entities; Association of Persons (AOPs) registered under any law (includes Trusts and NPOs, etc, not registered as company); non-profit organisations registered under the relevant laws, like charitable entities; employers, irrespective of their status, who pay taxable salaries and are obliged to deduct tax from payment of salary to their employees; federal and provincial governments organisations in local authorities, departments and district governments.
Other categories of withholding agents covers exempt entities - trusts, non-profit organisations; international agencies, non-resident entities and diplomatic missions, etc; persons required to deduct tax from payments of salary to non-residents, etc; non-residents, liaison offices, trade offices, branches and agents, etc, required to deduct tax while making payments; any other category required as per law to deduct/collect tax under the withholding tax regime and project directors of various kinds including development projects of federal/provincial governments.
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