PTBA recommends eliminating 12 provisions of withholding tax in next budget

KARACHI: Pakistan Tax Bar Association (PTBA) has recommended abolishing 12 different provisions of withholding income tax in order reduce the cost of business.
The apex tax bar of the country in its tax proposals for upcoming budget 2019/2020 recommended rationalization of withholding tax regime and in the first step it suggested eliminating 12 withholding tax rates.
The PTBA said that withholding tax regime significantly impacts the taxpayers and Inland Revenue Officers (IRO) alike.
On one hand, the regime increases the cost of doing business for a taxpayer and, on the other hand, it forces IROs to devote numerous resources in monitoring of withholding taxes.
The monitoring of taxes’ goal can be achieved by out sourcing the professional auditor firm and ability of the officer may be used for other work.
Even with the best efforts of the IROs, it is practically impossible to plug all the leakages of taxes withheld and deposit into the national exchequer.
“Globally the withholding tax regime is only applicable to persons whose income is difficult to determine, easier to evade or more likely to cross national boundaries. Currently, in Pakistan, withholding tax regime has been made applicable to almost all the categories of taxpayers and nature of payment under 49 provisions of law been weaved into the indirect taxes,” the PTBA said.
PTBA recommended revamping and rationalize of Withholding Tax Regime in order to reduce cost of doing business, complexity in the taxation laws and leakages in tax collection.
As a first step, it recommended following provisions of law may be withdrawn in which no substantial revenue is being collected in the last three years and eight months of current fiscal year:-

Sr. No. Section Description 2018-19
[Estimated on the basis of actual up to March, 2019]
2017-18 2016-17 2015-16
01 156B Withdrawal of balance under Pension Fund. 100 136 86 76
02 235A Domestic electricity consumption. 917 792 312 1,730
03 236B Advance tax on purchase of air ticket. 559 484 303 495
04 236D Advance tax on functions and gathering. 965 839 783 622
05 236F Advance tax on cable operators and other electronic media. 49 24 19 21
06 236J Advance tax on dealers, commission agents and arhatis etc. 136 123 123 109
07 236L Advance tax on purchase of international air ticket. 1,131 1,257 1,331 999
08 236Q Payment to resident for use of machinery and equipment.
644 619 328 174
09 236R Collection of advance tax on education related expenses remitted abroad 543 397 339 367
10 236S Dividend in specie. 3 20 452 623
11 236U Advance tax on insurance premium. 424 485 397
12. 236V Advance tax on extraction of minerals. 0.1

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