Karachi, November 5, 2024 – The Federal Board of Revenue (FBR) has recorded a remarkable 36.5% increase in withholding tax (WHT) collection for the fiscal year 2023-24, according to its annual report released on Tuesday.
This growth, from Rs 2,007 billion in FY2022-23 to Rs 2,740 billion in FY2023-24, underscores the FBR’s enhanced efforts in tax enforcement and compliance.
The FBR attributed this robust performance to improved compliance strategies and an increase in economic activities that have strengthened revenue collection across key withholding tax categories. Notably, the largest surge was seen in withholding tax from dividends, which grew by an astounding 69.9%. Following this, significant increases were recorded in collections from technical fees, bank interest and securities, salaries, and property sales, with growth rates of 53.6%, 52.8%, 39.3%, and 37%, respectively.
The breakdown of withholding tax contributions revealed that contract payments (Section 153) held the highest share, contributing 18% of the total WHT revenue. This was closely matched by profit on debt and bank interest (Section 151) at 18%, followed by salaries (Section 149) at 13%, dividends (Section 150) at 5%, and electricity bills (Section 235) at 5%. Together, these five major items contributed to 59% of the total withholding tax collection, underscoring the dominance of these revenue streams.
The FBR report emphasized that the notable increases across various tax sections illustrate the government’s dedication to strengthening tax collection mechanisms. Improved monitoring and enforcement policies played a central role in achieving these gains.
Individual Tax Head Analysis
Section 151: Bank Interest & Securities registered a striking 52.8% increase, reaching Rs 489,100 million—an increase of Rs 169,087 million over the previous year. This boost is attributed to rigorous monitoring of financial transactions and enhanced scrutiny in the banking sector.
Contracts (Section 153) followed as a significant contributor, recording a 27.4% rise from Rs 389,386 million in FY2022-23 to Rs 496,050 million in FY2023-24. This uptick is likely a result of the expansion in infrastructure and development projects across the country, which have driven up contract-based activities and tax contributions.
The Salaries category (Section 149) also posted strong growth, increasing by 39.3% to reach Rs 367,890 million. This increase is largely attributed to revisions in salary brackets and intensified withholding tax compliance efforts among employers.
Among the highest growth rates was seen in Dividends (Section 150), which soared by 69.9%, reaching Rs 145,006 million. The FBR cited improved dividend distributions across sectors and targeted policies aimed at preventing tax evasion as key drivers behind this remarkable increase.
The withholding tax on Electricity Bills (Section 235) rose by 30%, generating Rs 124,269 million. This reflects a wider compliance base in the utilities sector. Likewise, the tax on Sales of Property (Section 236C) saw an impressive 37% increase, collecting Rs 95,651 million. This growth aligns with increased activity in Pakistan’s real estate market.
In a surprising development, Cash Withdrawals (Section 231A) generated Rs 32,422 million, a significant jump from just Rs 20 million the previous year. This increase likely resulted from the FBR’s enhanced monitoring and possibly new levies targeting large cash withdrawals. Another notable rise was seen in the tax on Remitting Amounts Abroad (Section 236Y), which surged to Rs 18,789 million, reflecting the FBR’s drive to capture revenue from outbound financial transactions.
Continued Commitment to Fiscal Strength
The report highlights the FBR’s dedication to broadening the tax base and improving fiscal discipline. However, the report also noted that certain tax categories, such as Commission (2.5% growth) and Purchase by Retailers (11% growth), showed comparatively modest increases. This suggests potential for further focus and improvements in these areas to ensure a balanced and diversified revenue stream.
The FBR report commented on the agency’s efforts, noting that the significant growth in withholding tax collection for FY2023-24 aligns with the broader governmental goals of enhancing fiscal sustainability and building a resilient economy. The FBR’s improved collection performance reflects its ongoing commitment to implementing targeted tax policies and compliance measures designed to secure a stable revenue base.
Looking forward, the FBR has expressed optimism that sustained revenue growth, supported by continued economic expansion and robust enforcement measures, will further bolster Pakistan’s fiscal health. The agency remains committed to refining its policies to capture underutilized revenue sources, which are essential for financing critical infrastructure, healthcare, and education programs.
The impressive 36.5% increase in withholding tax collection not only enhances fiscal stability but also positions Pakistan to invest more effectively in its development agenda, fostering long-term economic growth and resilience.
