ISLAMABAD — The Federal Board of Revenue (FBR) issued a clarification on Friday to address certain media reports that suggested advance taxes give artificial boost to revenue collection.
The FBR emphasized that advance tax is not collected on arbitrary grounds and debunked the notion that it artificially inflates revenue figures.
In a statement released today, the FBR stated that the media reports in question are misconceived and misleading. It clarified that the collection of advance tax provides real-time quarterly data and aligns with the established practice in the tax systems of developed countries.
The advance tax collection mechanism allows taxpayers to fulfill their tax obligations on a quarterly basis, preventing the accumulation of an excessive tax burden at the end of the financial year. This approach not only eases the financial load on taxpayers but also provides the government with accurate, real-time estimates of tax collections throughout the year.
The “Pay as You Earn” principle, widely recognized and practiced globally, is embodied in the concept of advance tax. This methodology ensures that taxpayers contribute to their tax liabilities regularly, in proportion to their income, rather than facing a hefty tax obligation at the close of the fiscal year.
The FBR further emphasized that the collection of advance tax is based on clearly stipulated criteria outlined in Section 147 of the Income Tax Ordinance 2001. This legal framework ensures that the tax is collected transparently and in accordance with established regulations. Moreover, taxpayers receive credit for the advance tax paid when filing their annual tax returns.
Advance tax serves as a crucial component of the overall tax collection strategy, contributing to the government’s ability to meet its financial obligations and fund essential public services. The quarterly nature of advance tax payments aligns with international best practices and enhances the efficiency and predictability of revenue collection.
The FBR’s clarification aims to dispel any misperceptions surrounding the role and impact of advance tax in the overall revenue collection process. By providing a clear understanding of the rationale and legal framework behind advance tax, the FBR seeks to foster transparency and build confidence in the country’s taxation system. As the government continues its efforts to strengthen the economy, the effective communication of tax policies and practices is instrumental in building trust among taxpayers and stakeholders.
