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Business

November 4, 2015

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FBR expects boost to tax revenue collection

KARACHI: The Federal Board of Revenue (FBR) is expecting a major thrust to its drive of withholding tax collection from non-filers of returns following the withdrawal of exemption given to non-cash transactions taking place through the Pakistan Real-time Interbank Settlement Mechanism (PRISM), sources said on Tuesday.
A presidential ordinance, promulgated on October 31, 2015, excluded PRISM transactions from the ambit of advance tax on non-filers of income tax returns.
Interbank transfers and securities settlement constitute major portions in overall PRISM transactions.
A latest State Bank of Pakistan’s (SBP) report showed that PRISM transactions posted a phenomenal growth of 47 percent to Rs219.36 trillion in the last fiscal year of 2014/15.
The sources in the FBR said the scrutiny of withholding tax deduction on non-cash based transaction of some banks revealed that the facility was grossly misused.
In July 2015, the government introduced Section 236P into the Income Tax Ordinance, 2001 and imposed 0.6 percent withholding tax on above Rs50,000/day transaction by non-filers of income tax return.
Under the Section 236P, banks were to collect advance tax from all type of non-cash transactions. However, under Sub-section 4 the deduction of such a tax was exempted in case of PRISM transactions and payments made for federal, provincial or local government taxes. Later in July, the tax rate was cut to 0.3 percent on agitation by traders and businessmen. This reduced rate is applicable till 7 November. The FBR sources said the banks are now be required to submit detailed transactions report to the apex tax authority. The sources said since banks are filers of income tax returns they won’t be affected by the ordinance.
However, they would be liable to give explanation on transactions on behalf of individuals, they added.
Two months back, the Large Taxpayers Unit (LTU) Karachi conducted audit of banks for assessing the quantum of

collection under Section 236P.
An official at the LTU said some large transactions of individual non-filers were detected during this exercise.
The LTU Karachi also conducted a study of a smaller bank in this regard to estimate the quantum of PRISM transactions in the banking system.
LTU Karachi collected Rs3.36 billion during the first quarter of the current fiscal year, much lower than the estimated Rs8 billion.

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