The Federal Board of Revenue (FBR) has expressed concerns over the poor performance of field formations on issue of withholding taxes, arrears and recovery 'out of current demand' during 2012-2013.
Sources told Business Recorder here on Saturday that the FBR had issued instructions to the Chief Commissioners of Large Taxpayer Units (LTUs) and Regional Tax Office (RTOs) on the poor performance of the field formations on issues of withholding taxes, arrears and recovery out of current demand during current fiscal year. The purpose of the whole exercise is to overcome revenue shortfall and improve revenue collection in the remaining months of 2012-2013. The efforts-based revenue collection is the top priority of the FBR.
Sources said that the position of the revenue collection from withholding taxes, arrears and recovery out of current demand is not satisfactory. These three areas actually reflect that efforts of the field formations in revenue collection are not well-directed. The position is not up to the mark in these areas. The FBR has directed the Chief Commissioners to devise an action plan and submit the same for the consideration of the Board.
The first area is realisation of withholding taxes which needs improvement in the remaining months of current fiscal. The second most important area is the recovery of arrears which needs to be improved. Thirdly, recovery out of current demand is also an important area of revenue collection, they added.
When contacted, a tax expert opined that the regular follow up and organised monitoring of withholding taxes was not taking place in the field formations. "Due to the variety of challans in respect of different payments, different persons, different stations and eligibility of different RTOs for receiving and reporting the collection, proper accounting procedure is not applied. This is a major problem connected with the present system of recording/reporting of withholding taxes. With some of the organisations, the old system of book adjustments is still in vogue, which needs to be changed to cash collection. It is an inter-ministerial issue and Board may take up the same with the concerned agencies ie Controllers Navy, Air Force and Military Accounts to improve this procedure," he added.
He said that some of the problems faced in effective monitoring of withholding taxes related to major policy issues such as: automation of processes, proper registration of withholding agents, linkages between various departments of FBR and the other Government Departments, facilitation of taxpayers and their proper education to enable them to meet their tax obligations regarding withholding taxes. Documentation of the economy, absence of essential data regarding withholding taxes, documentation of the economy as a whole, their real tax potential vis-a-vis deductions made at macro level and other related issues do not create congenial environment for recording of transactions and monitoring of collection. Such issues need to be redressed immediately in an equitable manner to catch up with reform process, he added.