Karachi leads in paying taxes, again

ISLAMABAD: The Large Taxpayer Office (LTO) Karachi tops in collecting taxes -- income tax, sales tax, Customs duty and federal excise duty -- as its contribution fetched 30.7 percent of the revenue.

The LTO Lahore clinched the second position by collecting 17.1 percent taxes, and LTO Islamabad 14.2 percent.

According to Year Book for 2023-24 released by the Federal Board of Revenue (FBR), the share of direct taxes including withholding taxes stood at 48.7 percent while share of indirect taxes was 51.3 percent.

On direct taxes amounted to Rs4,531 billion, marking a significant increase of 38.5 percent from the previous fiscal year’s (2022-23) collection of Rs3,271 billion. In the same fiscal year, refunds totaling Rs52 billion were issued to claimants. Revenue under direct taxes includes collections from income tax, workers welfare fund/ workers profit participation fund, and capital value tax. Specifically, the income tax category encompasses withholding taxes, advance tax, payments with returns, and collection on demand.

In FY2023-24, the total revenue from collection on demand was approximately Rs127 billion, a decline of 21.5 percent from the Rs162 billion collected in the previous fiscal year.

The collection of advance tax significantly increased to Rs1,530 billion in FY2023- 24, up from Rs975 billion in FY2022-23, representing a substantial growth of 57 percent.

Payments with returns category encompasses payments made at the time of submission of annual Income Tax Returns. For FY2023-24, collections amounted to Rs162 billion, compared to Rs119 billion in the previous fiscal year, marking a growth of 35.8 percent.

In FY2023-24, withholding tax (WHT) collection reached Rs2,740 billion, a significant increase from Rs2,007 billion in the previous fiscal, marking a growth of 36.5 percent. All major WHT categories experienced positive growth. Notably, the WHT from dividends saw the highest increase at approximately 69.9 percent. This was followed by growth in collections from technical fees, profit on debt/ bank interest & securities, salaries, and the sale of immovable property, which grew by 53.6, 52.8, 39.3 and 37.0 percent respectively.

Sales tax collections totaled Rs3,087 billion in the 2023-24 fiscal year, which is Rs495 billion more than the previous fiscal year. This represents about 33.2 percent of the total tax collection.

Sales tax collected at the import stage grew by 17.0 percent, while domestic sales tax saw an increase of about 22.6 percent. The sales tax target for the year was achieved to 85.6 percent of the set goal. The net collection of sales tax domestic (STD) for FY2023-24 reached Rs1,222.8 billion, marking an increase of 22.6 percent from Rs997.8 billion in the previous fiscal year. This represents an additional revenue of Rs225.0 billion compared to the FY 2022-23.

As much as 62.4 percent of the STD revenue was contributed by 15 sectors, including electrical energy, POL products, sugar, cement, cigarettes, and cotton yarn. Electrical energy has become the leading contributor, accounting for 22.5 percent of the total, driven by an increase in power tariffs. Conversely, the contribution from POL products decreased from 11.9 percent in the 2022-23 fiscal year to nine percent in FY2023-24. All listed major revenue-generating items showed positive growth, except for natural gas and POL products. Sales tax on imports (STM) collection amounted to Rs1,863.9 billion, up from Rs1,593.5 billion in the 2022-23 fiscal year, showing a growth of 17.0 percent. Customs duty collection showed a positive growth of 18.5 percent. The net collection for FY2023-24 amounted to Rs1,104.1 billion, up from Rs931.7 billion in the 2022-23 fiscal, contributing around 12 percent to the total FBR revenues for the current fiscal. Net collection from the federal excise duty (FED) surged by 56.1 percent, rising from Rs369.9 billion in the previous fiscal year to Rs577.4 billion in FY2024. Consequently, the FED’s contribution increased from 5.2 percent to 6.2 percent. Major contributors to FED revenues include sectors such as cigarettes, cement, concentrates for beverages/ foods, and air travel. All major sectors, with the exceptions of concentrates and motor cars, experienced positive growth in the 2023-24 fiscal year.