Directorate General of Withholding Taxes, Federal Board of Revenue (FBR) has recovered a record amount of over Rs 19 billion through audit of withholding agents including banks, Pakistan Post Office, government departments, private and public limited companies and other agents during January-June 2012.
Sources told Business Recorder here on Friday that the directorate has passed orders against the withholding agents under section 161 (failure to pay tax) and section 205 (default surcharge) of the Income Tax Ordinance 2001 for recovery of huge amount of Rs 19 billion during the period under review.
The recovery of Rs 19 billion pointed towards huge potential of withholding taxes and audit of withholding agents can play most crucial role in generating extraordinary amount through revenue collection.
The withholding tax is a sustainable tax as once this tax has been imposed, its collection become easier through enforcement and audit. The withholding tax is easy to collect for which education of the withholding agents as well as payee is needed at national level. The audit of withholding agents was brainchild of FBR member Inland Revenue Shahid Hussain Asad for strict monitoring and recovery of the levy which has shown remarkable results during this period.
Keeping in view record recovery from withholding agents during January-June 2012, the potential would be further explored and successful audit of such agents would also results in withholding tax audit of other withholding agents.
The architect of the whole scheme was Shahid Hussain Asad, who motivated the field formations to strictly focus on audit of withholding agents. Three Large Taxpayer Units ie LTU Karachi recovered withholding tax of Rs 6072.631 million; LTU Lahore Rs 2554.897 million and withholding tax recovery by LTU Islamabad stood at Rs 466.264 million during this period. Now other categories of withholding agents would be focused on to generate additional revenue in 2012-13.
The total number of cases is 16596 for which withholding tax audit was initiated by the Regional Withholding Units (RWUs) at all Regional Tax Offices (RTOs) during January-June 2012. The well reputed and honest officers are posted in the RWUs in the field formations. The number of withholding audit completed was 8732 as on June 30, 2012.
The tax demand was created and recovery proceedings were initiated under sections 161 and 205 of the Income Tax Ordinance 2001. The RWUs have focused on the withholding agents falling in their respective jurisdiction. This is for the first time that the audit included desk-audit of the withholding tax statements filed by withholding agents.
The focus of the withholding agents is particularly government departments, private companies, contractors/suppliers, Tehsil Municipal Administration (TMA), banks and Pakistan Post Office.
For example, RTO Multan has conducted withholding audit of a bank and recovered an amount of Rs 310 million. RTO Faisalabad focused on withholding tax audit of fertilizer dealers and recovered an amount of Rs 115 million from this sector. Similarly, Large Taxpayer Unit (LTU) Karachi focused on banks. In case of RTO-I, RWUs of the RTOs focused on the import data and analyzed short-deductions and non-deductions of the withholding tax.
RTO-III Karachi checked withholding tax payments under section 149 of the Income Tax Ordinance 2001. Military Accountant General falls within the territorial jurisdiction of RTO Rawalpindi and RTO Islamabad is conducting withholding tax audit of the Accountant General of Pakistan.
In most of the cases, the tax was deducted but not deposited by the withholding agents in the national exchequer. In other cases, the tax was not paid or not deducted by the withholding agents.
The LTU/RTO wise break-up revealed that the RTO Peshawar recovered an amount of Rs 50.456 million as withholding tax up to June 30, 2012; RTO Abbottabad Rs 43.543 million; RTO Islamabad Rs 53.858 million; RTO Rawalpindi Rs 233.843 million; RTO Hyderabad Rs 593.042 million; RTO Sukkur Rs 50.075 million; RTO Quetta Rs 33.813 million; RTO-I Karachi Rs 34.589 million; RTO-II Karachi Rs 5891 million; RTO-III Karachi Rs 744.641 million; RTO-I Lahore Rs 1343.947 million; RTO-II Lahore Rs 359.153 million; RTO Multan Rs 539.025 million; RTO Sargodha Rs 35.443 million; RTO Faisalabad Rs 468.978 million; RTO Gujranwala Rs 132.921 million; RTO Sialkot Rs 79.324 million; RTO Bahawalpur Rs 118.624 million; LTU Karachi Rs 6072.631 million; LTU Lahore Rs 2554.897 million and withholding tax recovery by LTU Islamabad was Rs 466.264 million. The Board had already set up Regional Withholding Units (RWUs) at all Regional Tax Offices (RTOs) to effectively monitor withholding agents particularly government departments, private and public limited companies, banks and development finance institutions (DFIs).
The RWUs of the RTOs have the authority to monitor all the withholding agents, but top priority would be given to the banks, government departments and private and public limited companies, which would be instrumental in recovery of billions of rupees during 2011-12.
Under the new organizational structure of the RWUs at all the RTOs, the RWUs to be headed by an officer of BS-19 at RTOs Karachi, Lahore, Hyderabad, Multan, Faisalabad, Rawalpindi, Islamabad and Peshawar. The RWUs would be headed by an officer of BS-18 at RTOs ie Quetta, Sukkur, Bahawalpur, Sargodha, Gujranwala, Sialkot and Abbottabad.
Each RWU consist of following composite/special cells (dealing with both Direct as well as Indirect taxes). The first Monitoring and Audit Cell (MAC) would exclusively deal with the government departments. The second Monitoring & Audit Cell would have the mandate to monitor the Private and Public Limited Companies. The third Monitoring & Audit Cell of the RWUs would exclusively deal with the banks/DFIs.
Keeping in view the revenue potential of this segment and to ensure transparency and unified treatment senior most officers in the RTO were posted in RWUs and MACs. The RWUs remained engaged in preparation of exhaustive lists of withholding agents falling within their respective jurisdiction. The monitoring function constitutes the raison d'être in the whole exercise.
Based on vigilant monitoring Monthly Analysis Sheets shall be prepared in the case of each withholding agent, which has to be based on the details of correspondence made with the withholding agent each month; comparative figures of collection vis-à-vis last year's corresponding period; any significant change in withholding patterns of the said withholding agent and problems faced by the RWUs/MACs in monitoring of the said withholding agent, sources added.
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