The Federal Board of Revenue (FBR) is likely to receive a meagre amount as income tax to be deposited along with the returns by the corporate sector in December 2007, as the amount has already been collected from big companies in June 2007.
Tax experts told Business Recorder on Friday that certain companies and corporate entities had deposited tax in advance in June 2007 on the basis of their estimated income in June 2007. The FBR Income Tax Wing had collected the amount in June 2007 to show better performance in 2006-07.
Under law, the companies have to pay income tax on quarterly basis, but the amount for the whole year was collected in advance through quarterly instalment paid in June 2007, sources said.
Now, the board has no option except to collect due amount with the returns from these corporate entities in June 2008. In December 2007, there would be less amount of income tax, which would result in visible decrease in revenue collection from the corporate sector.
Sources said that the regional income tax departments in the field formations have focused on recovery of arrears, raising of demands and monitoring/enforcement for increasing collection in remaining quarters of 2007-08.
Experts said that the board might face shortfall of Rs 70 billion with the returns to be filed by companies in December 2007. The FBR data showed that collection of advance tax was Rs 117 billion in 2006-07 against Rs 63.4 billion in 2005-06, reflecting an increase of 84.5 percent. Break-up showed that banking sector paid advance tax of Rs 32.1 billion in 2006-07; oil and gas Rs 23.9 billion; telecommunication Rs 6.9 billion; fertiliser Rs 2.2 billion; tobacco Rs 1.7 billion; pharmaceutical Rs 1.7 billion and textile sector has paid Rs 0.2 billion as 'advance tax' in 2006-07.
The law for companies requires payment of advance tax in four quarterly instalments, which is worked out on the basis of last assessed income. Where taxpayers do not have last assessed income, they are not required to pay advance tax.
New sub-sections (4AA) and (6A) were inserted in section 147 of the Income Tax Ordinance 2001 requiring companies to take into account minimum tax paid, or payable under section 113 also. The advance tax will be payable even if there is no last assessed income. Thus, a company having last assessed loss; current year's loss; or no previous assessment is now obliged to pay advance tax on the basis of estimated quarterly accounting profit. The provisions of sub-sections (4AA) and (6A) are applicable from July 1 2007, they added.