FBR mulls tax audit of share transactions

KARACHI: The Federal Board of Revenue (FBR) may conduct forensic tax audit of share transactions as withholding tax collection on securities trade sharply fell around 39 percent during the last fiscal year of 2017/18, officials said on Friday.

The officials said the collection of withholding tax declined to Rs1.37 billion in FY2018 from Rs2.23 billion in the preceding fiscal year.

Pakistan Stock Exchange is responsible for collecting withholding tax from members at the rate of 0.01 percent on each transaction of sale or purchase of shares.

Officials said tax authorities suspected concealment of withholding taxes on share transactions because the brokerage commission on the similar transactions registered growth during the year.

The withholding tax collection from brokerage and commission posted 12 percent growth to Rs14.29 billion during 2017/18 as compared to Rs14.73 billion in the preceding fiscal year. The FBR officials said the withholding tax was imposed in order to broaden the tax base through identifying source of income made as investment in the stock market.

Officials said the forensic audit could be launched after filing of annual income return for tax year 2018 by the concerned withholding agents. The returns filing for tax year 2018 will be completed by December this year.

The withholding tax on share transaction was imposed in 2012, but the officials said the collection under this head registered growth despite bad performance of the market. Analysts said stock market poorly performed in 2017/18 due to economic weaknesses and political instability.

Brokerage Arif Habib Limited said the benchmark index KSE-100 underwent a 10 percent correction during the last fiscal year after consecutive eight years of positive performance since FY2010. Average daily volumes plunged 50 percent to 175 million shares in 2017/18 compared to 350 million shares during the preceding fiscal year.

Similarly, average traded value dropped 43 percent to $106 million as against $186 million, according to the brokerage report.