LAHORE: Both the federal and provincial governments are focusing on the oppressive implication of withholding tax (WHT) regime by a number of measures including a robust withholding regime under sales tax in 2007, enforcement of withholding of sales tax as the central pivot of the provincial revenue systems in the wake of 18th amendment since the early 2010s, and the imposition of an upfront infrastructure cess on all imports and exports by land or sea by Sindh with other provinces to tap new sources of easy and quick revenues, said sources from the Federal Board of Revenue (FBR).
If all that was not enough, they added, the state opted to fix some of its other malaise (that had nothing to do with taxation or tax system per se) through withholdingisation TV surcharge, Neelam Jehlum Surcharge, and compulsive contributions from employees' salaries at the time of natural calamities.
According to sources, the focus of tax administration increasingly shifted from normal taxation to withholding taxation during the 1990s when revenue numbers began to avail primacy over how they were being generated. They said a specialized directorate general (withholding taxes) was created in 2001 which intensified the extension of the withholding tax regime. About two dozen specialized commissionerates (withholding taxes) were established in February 2013 all over the country with maximum resources both in terms of men and means, being placed at their disposal.
In fact, they said, the system has been crippled by the withholding tax regime at such a rattling pace that FBR has started to pick up sundry procurement and tender notices in routine published in various newspapers, caption them as "real time proactive monitoring of withholding taxes," and circulate them to field formations prospectively stipulating that all due taxes, in these procurements, as and when became due, are properly withheld (as per law) and timely deposited (as per procedure).
According to the Board sources, the FBR has seldom bothered to collect information on massive money laundering ploys, illegal remittances, beneficial transactions and cases of mega tax evasion and share it with field collectors for proper adjudication. Since the bulk of the revenue comes from withholding, understandably maximum resources in each tax organization tend to be allocated for monitoring and collection of withholding taxes leaving normal taxation to the backburner, sapped and stunted. Thus, it is not astonishing that the best human resource and maximum means get allocated for withholding function at the expense of normal taxation, they stressed.
They said excessive deductions in the name of withholding tax also serve some other purposes. First, they added, the government gets free funds to finance its operations. Secondly, the government gives a gesture of being benevolent by disbursing tax refunds, as many times over the recent past, Prime Minister, Finance Minister, and Chairman, FBR, have been seen bestowing upon citizens refund cheques at specially arranged functions, that anyway legitimately belonged to them. Thirdly, sources said, the elitist state uses excessive deductions as a bargaining chip while negotiating settlements with various interest groups. Lastly, they added, excessive deduction creates opportunities for convenient rent-seeking.
Accordingly, in such an exploitative environment, elites also resort to pressurize the government for amnesty schemes as an effective tool of advancing their economic agenda.
Copyright Business Recorder, 2020
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