ISLAMABAD: Effective monitoring and audit of withholding agents will help the Federal Board of Revenue (FBR) to ensure substantial recovery of billions of rupees, especially in view of its raised withholding tax demand of over Rs32 billion during July-March 2013-14.
As per details, the Directorate General of Withholding Taxes has made huge tax demand of Rs32 billion against withholding agents during the corresponding period.
This amount will further increase in the remaining period of 2013-14. Out of the tax demand, the Directorate is expected to recover withholding tax to the tune of billions of rupees. The Directorate General of Withholding Taxes had recovered over Rs19 billion through audit of withholding agents including banks, Pakistan Post Office, government departments, private and public limited companies and other agents during January-June 2012. The directorate had passed orders against the withholding agents under section 161 (failure to pay tax) and section 205 (default surcharge) of the Income Tax Ordinance 2001 for recovery of due amount during the period under review.
The recovery of Rs19 billion indicates huge potential of withholding taxes and audit of withholding agents can substantially increase revenue. The withholding tax is a sustainable tax as once this tax has been imposed, its collection become easier through enforcement and audit. The withholding tax is easy to collect for which education of the withholding agents as well as payee is needed at national level. Keeping in view the past recovery from withholding agents, the potential would be further explored and successful audit of such agents would also results in withholding tax audit of other withholding agents, sources maintained.
In most cases, the tax was deducted but not deposited by the withholding agents in the national exchequer. In other cases, the tax was not paid or not deducted by the withholding agents. Recently, the Board has ordered withholding tax audit of the corporate sector employers to check whether withholding tax was accurately deducted from salaries paid by the employers to employees working in corporate entities and companies. In this regard, Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) are monitoring short-deduction in corporate sector under section 149 of the Income Tax Ordinance, 2001 through system audit. The purpose of the whole exercise is to recover the defaulted amount of withholding tax from the corporate sector in cases where employers failed to fully deduct the amount from salary under section 149 of the Income Tax Ordinance 2001.