FBR to reduce withholding tax provisions under World Bank program

ISLAMABAD: Federal Board of Revenue (FBR) is required to reduce number of withholding provisions to strengthen the income tax and take out this system from indirect taxes.

According to funding approved by the World Bank for Pakistan Revenue Mobilization Project, the FBR is required to reduce the scope of withholding regime.

The World Bank said that the funding requires a reduction in the types of transactions subject to income tax withholding.

“It contributes directly to transparency of the tax system, given that the withholding regime transforms income taxes into indirect taxes, which are less visible to taxpayers. It will also greatly reduce compliance costs for firms that have to act as withholding agents.

The World Bank also approved funds for transparent tax system for Pakistan. The World Bank said that under this funding the authorities require detailed reporting of tax expenditure in the annual budget documentation with disaggregated information about the cost and beneficiaries of each exemption and concession.

“It is important to broadening the tax base because it exposes the revenue foregone due to each exemption/concession, and the industries that benefit.”

The World Bank also stressed on coordination of the FBR with provinces. Under this funding program the FBR needs to reach agreements with the provinces on automated sharing taxpayer information, the methodology for calculating GST input adjustments, and common updated property valuation tables.

“This coordination will enable the FBR and the provinces to broaden their respective tax nets. Coordination can be facilitated through the newly established Fiscal Coordination Committee, comprising the federal and provincial governments.”

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