Tax collection from salary income declines by 44 percent: State Bank

KARACHI: Tax collection from salary income declined by 44 percent due to changes in income tax rates for all income slabs, according to a report issued by State Bank of Pakistan (SBP).

The SBP said that during first nine-months of fiscal year 2018/2019 the tax collection on salaries remained much lower than in the same months of preceding year.

The Federal Board of Revenue (FBR) collected Rs53.5 billion as tax from salary income during July – March of Fiscal year 2018/2019 as compared with collection of Rs95.2 billion in the same period of the preceding fiscal year.

“Tax collection on salaries also remained much lower than last year. In absolute terms, tax on salaries declined by Rs 41.7 billion during the review period, mainly due to changes in income tax rates for all income slabs,” the SBP said.

Direct taxes having a share of 37 percent in overall FBR tax collection recorded a decline of 0.8 percent during Jul-Mar FY19 in contrast to a rise of 12.2 percent during the same period last year.

Measures like the suspension of tax on mobile top-ups; reduction in come tax rates on salaries; reduction in the withholding tax rate on dividends; and spending under the PSDP explain the decline in direct taxes.

Within direct taxes, major hit emerged from withholding taxes (largest contributor in direct taxes), which recorded a contraction of 8.7 percent during Jul-Mar FY19 against a rise of 16.1 percent during the same period last year.

One-half of the decline in total withholding taxes is in the category of telephone/mobiles. Collection from telephone was only Rs 5.3 billion during Jul-Mar FY19 compared to a collection of Rs 38.0 billion during the same period last year.

This lower collection from telephone/mobile phones was not surprising amid suspension of taxes on mobile phone top-up by the Supreme Court.

Receipts from contracts were also lower compared to last year largely owing to a cut in the PSDP. Voluntary payments increased by Rs 34.3 billion during Jul-Mar FY19.

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