ISLAMABAD, September 15, 2024 – The Federal Board of Revenue (FBR) has reported a sharp decline in the collection of withholding tax (WHT) by 52% during the tax year 2020, following the abolishment of the tax for income tax return filers.
Official statistics from the FBR reveal that the WHT collection from cash withdrawals fell drastically to Rs15.2 billion in 2019/2020, down from Rs31.75 billion in the previous fiscal year.
The FBR attributed this decline to the government’s decision to exempt tax filers from withholding tax on cash withdrawals, significantly reducing the overall tax collected under this head.
Despite this drop, the FBR’s analysis of the top 10 major withholding tax revenue spinners for the fiscal year 2019/2020 highlighted mixed results across various sectors:
1. Contracts: WHT collection from contracts increased marginally by 1.2%, reaching Rs237.5 billion in 2019/2020 compared to Rs235 billion in the previous year.
2. Advance Tax on Imports: The collection from imports saw a decline of 10%, with Rs199.7 billion collected in 2019/2020 compared to Rs222 billion in the preceding fiscal year.
3. Salaries: A significant surge of 69% was recorded in WHT collection from salaries, totaling Rs129 billion in 2019/2020, up from Rs76.4 billion in the previous year.
4. Bank Interest and Securities: Collection under this category grew by an impressive 120%, reaching Rs128 billion in 2019/2020, up from Rs58 billion in 2018/2019.
5. Dividends: WHT from dividends declined slightly by 3.7%, with Rs55 billion collected compared to Rs57 billion in the previous year.
6. Telecommunication: The sector saw massive growth, with WHT collection from telephone services skyrocketing by 218%, totaling Rs54.6 billion in 2019/2020, compared to Rs17 billion in the previous year.
7. Electricity: WHT from electricity consumers increased by 28%, reaching Rs45.42 billion in 2019/2020, up from Rs35.6 billion the prior year.
8. Technical Fees: Collection from technical fees remained stable at Rs40.2 billion, compared to Rs40 billion in the preceding fiscal year.
9. Exports: A 12% increase was observed in WHT collection from exports, totaling Rs38.4 billion in 2019/2020 compared to Rs34.5 billion in the previous year.
10. Banking Cash Withdrawals: As mentioned, this category saw the sharpest decline, falling by 52% to Rs15.2 billion in 2019/2020 from Rs31.75 billion in 2018/2019.
Overall, the top 10 withholding tax revenue spinners contributed Rs944 billion in 2019/2020, marking a 17% increase compared to Rs807 billion in the previous fiscal year. The total WHT collection for 2019/2020 was Rs1,092 billion, up 13.7% from Rs960 billion in the preceding year. The share of these top 10 contributors accounted for 86.4% of the total WHT collected.