Authorities mull actions against provincial departments

Withholding tax deduction

KARACHI: Tax authorities are mulling actions against a score of provincial government departments for their failure in depositing the deducted withhold taxes to national exchequer, sources said on Tuesday.

The sources said tax officials at Regional Tax Office (RTO) Karachi told Special Assistant to Prime Minister on Revenue Haroon Akhtar during his visit that they were facing difficulties in recovering the taxes withheld by various departments of the Sindh government despite several reminders. Akhtar advised the officials to initiate ‘penal’ actions as per the laws against the defaulted government departments.

Provincial departments deduct withholding income tax under various heads, including salaries, development activities/contracts, property registration/transactions and motor vehicle registration.

The RTO Karachi had found discrepancies in amount deposited by at least two departments: motor vehicle and immovable property registration. A substantial amount was not transferred to the Federal Board of Revenue (FBR), the sources said.

They expressed their inability to quantify the discrepancy, but they said it would be in billions of rupees.

PM advisor, who visited last week, reviewed the performance of RTOs and large taxpayers units (LTUs) in revenue collection. Akhtar asked them to discharge their duties without harassing taxpayers.

During meetings with commissioners and chief commissioners, Akhtar discussed revenue collection of RTOs, including RTO Corporate, RTO-II and RTO-III Karachi, RTO Hyderabad, RTO Sukkur, RTO Quetta, LTU Karachi and LTU-II Karachi.

The officials told him about the affects of the changes brought through the Finance Act, 2016 on revenue collection. Due to reduction in sales tax rate on petroleum products, the indirect and direct tax witnessed a sharp decline. 

Because of the incentives to agriculture sector, the corporate entities in fertiliser sector also fared below performance. Banks witnessed a decline in their profits and therefore their tax contribution also fell.

Akhtar advised the RTO officials to conduct market surveys and identify new taxpayers. The officials were told to further tighten the monitoring of withholding tax, which is a major source of revenue for the FBR.