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FBR finds short payments of withholding tax by banks

KARACHI: Tax authorities are struggling in pinning down the actual amount of tax deducted from the non-filers in the absence of monthly collection statements from the bank, sources said on Tuesday. The Federal Board of Revenue (FBR) suspect banks have concealed a portion of withholding tax deducted from the non-filer

By Shahnawaz Akhter
October 07, 2015
KARACHI: Tax authorities are struggling in pinning down the actual amount of tax deducted from the non-filers in the absence of monthly collection statements from the bank, sources said on Tuesday.
The Federal Board of Revenue (FBR) suspect banks have concealed a portion of withholding tax deducted from the non-filer but it’s difficult to prove as complete data (monthly statements) is not available,” said a source at the Large Taxpayers Unit (LTU) Karachi. “The recovery of short payment will only be possible on the basis of monthly withholding statements.”
The source said the short payment made by the banks could be in billions once it’s cross-checked with the statements. Withholding agents, mandatory to file monthly statement on 15th day of every month, have not filed any statement so far during the current tax year 2016.
The FBR initially extended the last date for filing monthly statement for July 2015, which was due on August 15, to September 15 as it was also the last date for filing statement for August 15. “Considering difficulties on the online portal for filing monthly statement faced by the taxpayers the authorities further extended the deadline to September 28 and now it is 8 October,” the source said.
The taxmen recently conducted spot audit of several banks to assess the collection under the Section 236P of Income Tax Ordinance, 2001. Sources said the auditors had found discrepancies in withholding tax collected by banks and their subsequent deposit to the FBR.
The government had inserted Section 236P in the Income Tax Ordinance, 2001 through Finance Act, 2015. The rate of withholding tax was fixed at 0.6 percent only for non-filers of income tax returns on each banking transaction of Rs50,000 or more.
However, the government faced stiff resistance from the trading community and slashed the tax rate to 0.3 percent till the period of October 31.
The source said FBR has found significant short payment of deducted tax by the banks but “it cannot take any action without statements from the banks.”
The collection under Section 236P for first quarter is not available due to online system errors. However, the FBR collected around Rs4 billion by the middle of September 2015.
The FBR estimated the collection from non-filer transaction tax at Rs35 billion for fiscal year 2015/16, which means the estimated collection for the first three months should be around Rs9 billion, another source said.
He said a delay in withholding statements from the banks is also hampering the government’s efforts to broaden tax base. “The FBR can identify new taxpayers on the basis of non-cash transactions if it receives withholding statements on time,” another official at LTU Karachi said.
The banks are required to provide details of non-filer, including name, address, CNICs and amount in the statement.