ISLAMABAD: The Federal Board of Revenue (FBR) has proposed one percent increase in all withholding taxes rates from October 1, 2024 in case the revenue shortfall continues in September 2024.
Sources told Business Recorder the proposal has been drafted at the FBR level to increase withholding taxes rates by one percent if the FBR continues to face shortfall in tax collection during last month of first quarter (July-September) of 2024-25.
The proposal would be enforced through a supplementary Finance Bill in case the FBR fails to meet the target for September 2024. Now, it depends on the tax collectors to meet the target for September or further increase withholding tax rates in October.
Jul-Aug: there’s Rs98bn shortfall, admits FBR
The withholding taxes (collected in sales tax mode) constitute over 70 percent of the overall direct taxes collection during 2023-24.
The standard rate of sales tax may not be increased but the withholding taxes rates are proposed to be raised by one percent in case of persistent revenue shortfall in tax collection, sources maintained.
The FBR has suffered a huge shortfall of Rs 98 billion in tax collection during first two months of 2024-25, as net collection stood at Rs1,456 billion against assigned target of Rs1,554 billion during this period.
According to sources, there is likelihood that the FBR will face a shortfall of nearly Rs 100 billion in September keeping in view decrease in import taxes and other factors. On the import side the same momentum could not be maintained due to continued compression in imports. The proposed autonomous growth of 18 percent in domestic taxes may be decreased to 11 percent in coming months.
Sources added that under present circumstances, the bashing of senior tax officials and threats of suspension and transfers and postings would not work to increase tax collection in September.
An immediate strategy is needed on the digitization side to increase tax collection through effective monitoring of withholding taxes under the “SWAPS” system and checking illegal/inadmissible sales tax adjustments of over Rs 1 trillion through data analysis/verifications through PRAL.
Copyright Business Recorder, 2024