KARACHI: The two top traders’ bodies have urged the Federal Board of Revenue (FBR) to grant withholding agents tax credit for collecting revenue from taxpayers.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and Overseas Investors Chamber of Commerce and Industry sought incentives for withholding agents in form of tax credit against their liabilities. FPCCI recommended around 3-5 percent rebate for withholding agents for their services rendered to FBR, said the sources.
The business community said with an increasing number of withholding taxes and introduction of different rates of tax for filers and non-filers, the burden on withholding agents has significantly increased.
Withholding tax contributed around 68 percent to the income tax collection during 2015/16. Withholding tax collection grew 20.3 percent to Rs831.4 billion during the last fiscal year.
The community said withholding agents are providing services to FBR free of any charge for the last many decades. They are incurring heavy expenditures in staff hiring and training, tax record storage cost and allied operation.
“Instead of giving relief, FBR is penalising the withholding agents in case of short deduction or late deposit,” the FPCCI said in a statement.
Tax department’s sources said business community as well as tax practitioners complained about difficulties in filing withholding statements on Iris, which is an online return and statement filing system.
The Iris system requires a withholding agent to declare, in the statement, whether the tax collected/deducted by him is a final tax or an adjustable tax.
“The finality or adjustability of the tax withheld cannot be determined by the tax withholding agent and he should not be burdened with a responsibility to determine tax liability of the person from whom he is deducting the tax,” Karachi Tax Bar Association said in a separate statement.
Under Income Tax Ordinance 2001, every prescribed individual is required to collect and deduct withholding tax under different provisions of the ordinance. A prescribed individual includes the federal government, a company, a non-profit organisation, a foreign contractor or consultant, a consortium or joint venture, an exporter (an association of persons), having a turnover of Rs50 million or above post-2007 tax year and an individual registered under Sales Tax Act 1990.
