The withholding tax statements would be used as a major source of broadening the tax base to allocate National Tax Numbers (NTNs) to un-registered persons from whom tax was being deducted by withholding agents.
Tax advisors told Business Recorder on Monday that approximately 0.1 million NTNs have been issued to persons, within the jurisdiction of Regional Tax Office (RTO), Karachi, where their names were frequently reported in the statements filed by the withholding agents.
The withholding agents have deducted tax from these persons, who were out of the tax net. In other cases, payments have been made to these persons, liable to withholding tax deductions under relevant tax laws. The potential of withholding statements for expanding the tax base is clearly evident from the said example.
Presently withholding data is only used for improving revenue collection. However, the Federal Board of Revenue (FBR) has not yet conducted any exercise to ascertain the actual number of persons whose tax was deducted by the withholding agents, and filing income tax returns as well.
The data of such persons needs to be verified from the national database of "NTN Master Index" to bring these persons into the tax net. The data of persons, whose tax was being deducted by withholding agents, would expand the base. But, it seemed that the tax department has not been able to process data from the central database for bringing such persons into the tax net.
Sources said that mobile phone data could also be used for broadening the tax base. For example, persons paying cellular bills of Rs 4000-5000 per month need to be checked whether they are return filers or not. The potential mobile phone users should be brought into the tax net. There should be some specific limit of mobile phone bills for filing of tax returns by the cellular users.
It is strange to note that the Directorate General of Withholding Taxes has no powers to directly seek data from the cellular companies or any regulatory authority or government department to enforce return filing by the un-registered persons.
The relevant commissioners are empowered under the Income Tax Ordinance 2001 to collect such data from cellular companies. The directorate seemed to be engaged in monitoring of withholding taxes, but unable to take enforcement measures to broaden the tax base.
Therefore, powers of the DG Withholding Taxes need to be enhanced for bringing taxpayers into the tax net. Similarly, banks deduct tax on "profit on debt", which is final discharge of tax liability.
This data should be collected from banks for brining un-potential persons into the tax net. The persons, whose tax was being deducted by banks, were required to file the relevant withholding statement under the income tax law.
Profit on debt may be paid to the individual investors making investments in Bonds, income funds, trading companies selling goods on credit/deferred payment basis, financial institutions including SBP granting loan to institutional investors etc. Such sources need to be explored and documented for regular monitoring. Sources said that withholding statements would play a key role in broadening the tax base by using data to bring new taxpayers into the tax net.
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