The Federal Board of Revenue (FBR) would closely monitor withholding tax on stock exchanges transactions, exports, passengers transport vehicles, CNG stations, electricity used by commercial consumers and telephone subscribers to broaden the sphere of collection in the remaining months of 2007-08.
Sources told Business Recorder on Wednesday that the board has examined the issue of withholding tax under section 233A of the Income Tax Ordinance 2001 on account of sale/purchase, trading of shares and financing of carryover trades (Badla) in shares business.
It has been observed that there is an improvement of merely 2 percent in withholding tax collection from stock exchanges in 2007-08 against the same period of last fiscal year. This calls for a detailed analysis of this sector and a standard operating procedure (SOP) for monitoring collection under section 233A of the Ordinance 2001.
Sources said that the SOP would exclusively cover monitoring under section 233A of the Ordinance 2001. The FBR has issued instructions to Director-General Regional Tax Office (RTO), Karachi to conduct a detailed analysis of withholding tax under section 233A on account of sale, purchase and trading of shares including badla financing.
Sources said that the board has shown serious concern over the decrease in collection from exports and telephone subscribers despite massive growth of telecom sector in 2007-08.
There has been around 4 percent decrease in withholding tax collected from exports in 2007-08 against the same period under various sub-sections of section 154. The FBR would carry out an in-depth study to examine reasons contributing to declining trend.
According to FBR, it wants to improve withholding tax collection by fully implementing sections 234, 234A, 235 and 236 of the Ordinance 2001. The section 234 is related to withholding tax on transport services; 234A tax collected from CNG stations; 235 electricity consumption by commercial industrial consumer and section 236 relates to telephone users.
The FBR said that although there is an improvement under all heads except passengers transport vehicles and telephone subscribers (other than mobile phone), there is considerable room for improvement to realise actual tax potential.
FBR Chairman Abdullah Yusuf directed the FBR DT Wing that despite massive growth in the telecom sector the fall in revenue on account of withholding under section 236 (telephone subscribers other than mobile phone) is not understandable and the board should look into the reasons of such decline.