ISLAMABAD: The Federal Board of Revenue (FBR) has claimed that the share of withholding taxes stood at 60 percent in the overall direct taxes collection during 2023-24.

The FBR’s report on 2023-24 performance revealed that the analysis of the income tax collection indicates that withholding tax accounts for 29% of the FBR’s total collection and represents 60% of the income tax collected..

On the other hand, Auditor General of Pakistan (AGP) has found that withholding taxes constituted 57 percent of the total direct taxes during the period under review.

Property values in Karachi: New SRO retains rebate provision, FBR asked

The AGP has pointed out a major discrepancy in tax collection of the FBR where withholding taxes are wrongly shown under the head of “direct taxes” instead of “indirect taxes”.

The last audit report of the AGP (audit year 2023-24) revealed that withholding taxes were indirect in nature, but the same were being collected as direct taxes by the FBR.

The AGP report revealed that the tax collection under the withholding tax regime relies on the person making the payment by treating him as a withholding agent. Tax collection under this head is easier due to “at source deduction”, therefore, withholding taxes form a major part of the total tax collection, the report said.

Tax collection on account of withholding taxes was Rs1,874 billion against the total direct tax collection of Rs3,271 billion for the fiscal year (2022-23).

In terms of proportion withholding taxes constituted 57 percent of the total direct taxes. Among the ten major components of withholding, withholding taxes on contractual receipts, exports, bank interest, and various other items fall under the minimum tax or final tax regime.

The audit observed that collections under these heads were indirect, but the same were being collected/reported as direct taxes by the FBR.

Copyright Business Recorder, 2024