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The Federal Board of Revenue (FBR) has detected a huge tax gap, of Rs 21.36 billion, between the potential and actual withholding tax collection in the case of Central Directorate of National Savings (CDNS) during 2008-09.
Sources told Business Recorder here on Saturday that the FBR has issued instructions to Member, Enforcement and Accounting, Chief Commissioners of Large Taxpayer Units (LTUs), and Regional Tax Offices (RTOs) to conduct audit of the National Saving Centres for maximising collection of withholding tax.
Details showed that the FBR wanted to conduct audit of each National Saving Centre to narrow the gap between the actual tax collection and potential of the levy to be amassed from these centres. The actual gap between the due and collected tax by the CDNS can only be determined by the respective Regional Tax Offices (RTOs) through withholding tax audit of each National Saving Centre located within their jurisdiction. The field formations need to conduct withholding tax audit of each National Saving Centre falling within their jurisdiction.
According to sources, the CDNS paid total interest amounting to Rs 238.9 billion during 2008-09. The FBR has compiled data on the basis of figures obtained from the websites of Ministry of Finance and the CDNS. The FBR has estimated approximately Rs 23.89 billion as tax payable at the rate of 10 percent from different saving schemes. On the other hand, the tax actually collected from the saving schemes stood at Rs 2.527 billion, reflecting a gap of Rs 21.36 billion in 2008-09.
During first quarter of 2009-10, the CDNS paid interest of Rs 67.37 billion during 2008-09. The FBR has worked out around Rs 6.737 billion as tax payable, whereas the tax actually collected from the saving schemes stood at Rs 0.544 billion, reflecting a gap of Rs 6.193 billion in 2008-09.
Sources said that part of the gap can be attributed to exempt interest on investments/deposits up to Rs 150,000, but the overall gap is so huge that the element of leakage or under-deduction/non-deduction cannot be ruled out.
In the first quarter of last fiscal year, total withholding tax collection under this head was reported at Rs 0.340 million whereas for the first quarter of the current fiscal, the collection moved up to Rs 0.544 million, showing an increase of 60 percent.
Although collection for the first quarter of financial year 2009-10 has improved significantly compared to corresponding quarter of the financial year 2008-09, yet overall collection is quite low vis-à-vis interest paid.
Sources said that the collection reported by RTO, Abbottabad for the first quarter of financial year 2009-10 stood at Rs 0.003 million compared to the collection at Rs 10.595 million for the corresponding quarter of the previous financial year showing a huge decline.
The actual gap between the due and the collected tax under this head ie interest on profit paid by national savings, through regular monitoring. The gap between the tax due and the tax collected can only be checked by conducting audit of each branch of National Saving Centre.
The in-house data of FBR has no bifurcated figures of collection of Withholding-Tax from the National Saving Centres and the Post Offices. Therefore, it is not possible to separately report collection from these two sources. Pakistan Revenue Automation Limited (PRAL), technical arm of the FBR, should amend the computer software to separately report collection of withholding tax from NSS and the Post Office. Similarly, the monthly progress report (MPRs) of RTOs and the National MPR compiled by the FBR Directorate of Research and Statistics (DRS) should also be amended to separately report collection from these two sources, sources added.
Under section 151 of the Income Tax Ordinance 2001, withholding tax deduction on profits earned on certificates and deposits made under different National Savings Schemes is part of the law. The NSCs have also to operate as withholding agents for accurate deduction of tax.

Copyright Business Recorder, 2010

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