No co-ordination between Federal Board of Revenue (FBR) and Sindh Revenue Board (SRB) over Workers' Welfare Fund (WWF) is creating immense difficulties for taxpayers to claim WWF payable as deductible tax to the latter. The issue was highlighted by Karachi Tax Bar Association (KTBA) in a letter sent to chairman SRB here on Monday.
According to the KTBA, under section 60-A of the Income Tax Ordinance, 2001, a taxpayer is entitled to a deductible allowance in respect of WWF paid under the WWF Ordinance, 1971. Although the amount paid as WWF under section 5 of the Sindh WWF Act is declared claimable as a deductible expenditure for income tax purposes, no such corresponding deduction has yet been provided in the Income Tax Ordinance, 2001.
It said that there was no co-ordination between FBR and SRB on this issue that is creating difficulties for taxpayers to claim the same as tax deductible to the provincial revenue authority. It said that the association through this letter sought clarification on same constitutional and computational issues, which had arisen after the promulgation of the Sindh Workers Welfare Fund (SWWF) Act, 2014.
Moreover, it said that although the federal WWF Act had been repealed by the Sindh WWF Act to the extent of jurisdiction of Sindh WWF Act, the federal government had not by itself repealed its WWF Ordinance that led to enforce two WWF laws simultaneously. Resultantly, taxpayers are forcibly levied twice by two different authorities.
Under the Sindh WWF Act, every industrial establishment located in the province of Sindh is required to pay WWF. The term 'located in Sindh' has not been further elaborated and issues will arise in computing the WWF in the following situations:
i) An industrial establishment' has a registered/principle office in the province of Sindh but has factory, outlet, branch in other provinces. How such industrial establishment will compute and pay WWF to Sindh on profit attributable to places of business located in Sindh?
ii) An industrial establishment' has a registered/principle office in another province but has factory, outlet, branch in the province of Sindh. How such industrial establishment will compute and pay WWF in Sindh on profit attributable to factory, branches etc located in Sindh?
Similarly, in case of a bank, having branches located all over the country, having either registered/principle office located in the province of Sindh or outside Sindh. How such bank will compute and pay WWF on profit attributable to branches located in the province of Sindh?
What will be the basis for the apportionment of profits between the places of business located in Sindh and those located in other provinces? Therefore, KTBA urged the SRB to issue a clarification to address aforesaid scenarios after consultation with the FBR and suitable amendment should be made in the Sindh WWF Act to explain the term 'located in the province of Sindh' to resolve the ambiguity.
The KTBA said that taxpayers' concern was whether they would be able to adjust the WWF payable to SRB against their income tax refunds in a similar manner unless both the SRB and FBR agree on the same and added that clarification in this regard should be issued to make taxpayers enable to adjust their Sindh WFF liability against income tax refunds.
It said that after strict interpretation of Sindh WWF Act, industrial establishments owned by federal government could presently not avail WWF exemption. Keeping these problems in view, the KTBA has recommended for suitable amendments to facilitate the taxpayers at maximum.