FBR thinks FWO is not entitled to income tax exemption, but PML-N government is pressing board to keep FWO out of taxes
ISLAMABAD: Toeing the government’s line, the Federal Board of Revenue (FBR) is expected to carry on the tax-exempt status of the Frontier Works Organisation (FWO).
“In the prevailing political scenario, the government is desirous of the Federal Board of Revenue to continue income tax exemption for the Frontier Works Organisation and deliberations are underway at quarters concerned of the FBR,” an FBR source told Customs Today.
He added that the FWO, enjoyed tax exemption which is being renewed yearly. Whereas the private companies have to pay minimum 34 percent income tax which disables them from floating bids in the construction of roads and highways of the National Highway Authority (NHA).
The source said the government was pressing the FBR to slap no taxes on the FWO in the future.
“The NHA has sought opinion from the FBR about the status of the FWO; whether it is a government organisation or not so that the NHA may or may not deduct tax from payable amount to the FWO,” the source said, adding that the FBR has ascertained the FWO status by going through documents presented by the FWO.
“The FBR established opinion that the FWO is a company functioning under Companies Ordinance 1984 and is not entitled to income tax exemption. Therefore withholding tax and other taxes must apply on it,” the source said.
He observed that the NHA had sought explanation from the Regional Tax Officer (RTO) Rawalpindi in this regard. The RTO sought guidance from the FBR on the matter.
“However, the FWO is adamant that it is a government organisation and is entitled to income tax and other tax exemption,” he said.
The source said that tax exemption to the FWO had disabled private construction companies from floating bids on competitive rates, adding that it had been a practice that the FWO would sublet the contracts to private contractors after winning them from the NHA.
“However, if the FBR continues tax exemption to the FWO, it will not be appropriate for system as well as an environment of competitiveness in the business,” he said, adding that quality and competition would be compromised.
The Public Accounts Committee of the National Assembly has also discussed the issue several times.
