The Federal Board of Revenue (FBR) has differed with the figures given by the Auditor General of Pakistan (AGP) in report titled, "Performance Audit" (Withholding Tax), as the withholding tax loss of Rs 29 billion did not take into account exemptions available to profit on debt/dividends under Income Tax Ordinance 2001.
The FBR said that the Audit has calculated withholding tax loss of Rs 29 billion on the basis of accounting statements available on websites of banks without realising the fact that exemptions are available on payments to government/widows and Behbood certificates etc.
The FBR has further clarified that AGP has reported about the potential loss of revenue of Rs 29 billion in four areas of withholding taxes. The area reported for short recovery of withholding tax included profit on debt and dividends of Rs 13.696 billion and Rs 21.987 billion. The FBR also failed to collect Rs 9.128 billion as tax on dividend from 232 listed companies.
The FBR stated that the Audit & Accounts Department calculated this from accounting statements available on websites of Banks and companies based on profit on debt/dividends. It did not take into account statutory exemptions i.e. payments to government, widows, Behbood certificates and exemption listed in Second Schedule where no tax is liable on profit on debt and dividend. The audit observation is therefore, uncalled for, FBR added.
The report said that a sum of Rs 49 (b) (direct taxes), stuck up in litigation and is sub-judice, should be viewed in the light of the taxpayers' inherent right to approach the court of law. FBR, therefore, needs to wait for court decisions. The FBR has further denied loss of revenue as reported in a section of the press attributing the loss of billions of rupees to flaws in Pakistan Customs Computerised System (PACCS).
The FBR said that audit authorities had pointed out loss of revenue in 36 cases by interpretation of law. Therefore, the impression given in the news that errors in computation resulted in loss of revenue is incorrect. Out of total of Rs 2.26 billion pointed out by audit authorities, Rs 1.748 billion relates to one case where Rs 129 million also stands recovered from it. Since the matter is sub judice and 15 percent is recovered, FBR is not invoking coercive measures at the moment. The balance amount will be taken up after decisions of appeals; therefore, FBR has completed the recovery process available under the law.
In other 35 cases, some audit observations are not valid and are contested. In the rest of cases the correct amount of tax has been charged and recovered. Some taxpayers are in appeals; therefore, FBR is not in a position to recover the tax through coercive measures. External audit and internal audit of the FBR, regularly conduct audit of taxpayers throughout the year pertaining to levy of taxes. FBR collects billions of rupees through desk audit/audit of tax returns every year. This is a routine exercise, the FBR added.
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