ISLAMABAD: The Auditor General of Pakistan (AGP) has found that the Federal Board of Revenue (FBR) is wrongly collecting certain kinds of withholding taxes under the direct taxes mode, which actually falls under the category of indirect taxes.

The FBR is collecting these withholding taxes, having the nature of indirect taxes, under the cover of direct taxes, the AGP added.

This revelation has been made in the AGP’s new report issued for the audit year 2021-22 on Inland Revenue and Customs.

FY22 withholding tax collection grows 24pc to 1.53trn YoY

The report revealed that the withholding taxes contributed 84.70 percent of the total amount of direct taxes. Among the 10 major contributors of withholding taxes, the withholding taxes on contractual receipts, exports and bank interest and various other items are constituted final taxation under the Income Tax Ordinance, 2001.

The AGP has observed that the collection of withholding taxes on contractual receipts, exports and bank interest are in the nature of indirect tax instead of direct tax, but is being collected as a direct tax by the FBR under the Income Tax Ordinance, 2001.

Copyright Business Recorder, 2022