Year Book 2017-18: Payment of tax with filing of returns shows 8.3 percent decline

The payment of income tax with filing of income tax returns has shown a decrease of 8.3 percent in 2017-18 as compared to 2016-17, reflecting poor enforcement of the Federal Board of Revenue (FBR). As per FBR Year Book for 2017-18 issued on Friday, the withholding tax (WHT) collection during 2017-18 has been Rs1,047 billion against Rs 944 billion in 2016-17 indicating a growth of around 10.9 percent.
Within the category of Advance Tax/Payments with Returns, this component includes payments with returns and advances. In this head, an amount of Rs 377.4 billion has been collected during fiscal year 2017-18 as compared to Rs 370.5 billion in 2016-17. Major component of this mode of payment is the Advance Tax where a sum of Rs 335.8 billion has been collected against Rs. 325.1 billion in 2016-17 registering a growth of 3.3%. The second component is payment with returns, which has shown a negative growth of 8.3% during the period under review.
The FBR said that the direct taxes have contributed 40% to the total tax collected during 2017-18. Net collection stood at Rs. 1,536.6 billion reflecting a growth of 14.3% over the last year. An amount of Rs. 69.5 billion has been paid back as refund to the claimants in FY 2017-18 as against Rs. 50 billion during 2016-17. The collection of income tax comprises of withholding taxes (WHT), Advance Tax/Payments with Returns and collection on demand (COD).
The analysis of collection on Demand (CoD) revealed that this part of the collection carries great importance as it reflects departmental efforts in revenue collection. The collection from arrear demand and current demand has been Rs. 17.7 billion and Rs.85.1 billion respectively during FY 2017-18. The collection from current demand has grown by more than 17% showing vigorous departmental efforts.
Advance Tax/Payments with Returns: This component includes payments with returns and advances. In this head an amount of Rs 377.4 billion has been collected during FY 2017-18 as compared to Rs 370.5 billion in the 2016-17. Major component of this mode of payment is the Advance Tax where a sum of Rs 335.8 billion has been collected against Rs. 325.1 billion in 2016-17 registering a growth of 3.3%. The second component is payment with returns, which has shown a negative growth of 8.3% during the period under review.
The FBR said that Withholding Taxes (WHT) contributes a major chunk, ie, 65% to the total collection of income tax. The WHT collection during fiscal year 2017-18 has been Rs. 1047 billion against Rs. 944 billion indicating a growth of around 10.9 percent. The nine major components of withholding taxes that contributed around 87% to the total WHT collection are: contracts, imports, salary, telephone, dividends, bank interest, cash withdrawal, electricity and exports. As far as growth is concerned, collection from salary grew by around 20%, contracts (9.1%), dividends (16.9%), imports (11%), cash withdrawal (11.5%) and electricity (30.9%).
The highest contributor in withholding taxes is contracts with 27% share, followed by imports (20.9%) and salary (12.7%). Further break-up reveals that the share of only two heads of WHT i.e. contract and imports is around 48% and further addition of withholding tax on salary raises the share of these three items to more than 60% of the total withholding taxes, showing high reliance on few heads. More diversification in WHT is needed which is possible through finding out new avenues, the FBR added.