Withholding tax collection falls 8.5pc to Rs3.76bln

KARACHI: The Federal Board of Revenue (FBR) collected Rs3.76 billion in withholding tax from non-filers during the first four months of the current fiscal year, down 8.5 percent over the same period a year ago mainly on subdued property transactions. 

Officials on Wednesday attributed the decline to a slowdown in buying and selling in the real estate sector.

The FBR had managed to collect Rs4.12 billion in withholding tax from non-filers’ banking transactions in the July-Oct period of 2015/16.  “Property transactions came almost to halt following the changes in the valuation laws,” an official said on condition of anonymity.

 “Major banking transactions were made in the property business in the past and most of the transactions were made by non-filers.”  The laws were enforced on July 31. The apex tax authority announced new property valuation tables in order to revise up capital gains tax on the immoveable properties.

“Since then people have been reluctant to make property transactions,” said the official. The officials, however, said the parallel banking system, enabling buyers and sellers to conduct transactions, was also a reason behind the falling withholding tax collection. 

They said a score of investors preferred the informal channel to avoid the tax registration and additional tax bar. The government, through Finance Act 2015, introduced a new section 236P into Income Tax Ordinance, 2001 under which a non-filer of income tax was required to pay 0.6 percent withholding tax on an amount of Rs50,000 in case of a bank transfer. However, the rate was reduced to 0.3 percent and maintained at this level for a long time. In March, the rate was increased to 0.4 percent till December 31.

The tax officials said tax return filing increased over the year and individuals got themselves registered with the authority to avoid the additional tax payment.  “Around 35,000 tax returns were received for the tax year 2015,” the FBR official said.

The FBR has already geared up its efforts to improve the tax compliance, and is monitoring banks and financial institutions to verify withholding tax deductions.   The revenue body collected Rs20.5 billion under this head during the last fiscal year of 2015/16.