Withholding tax should be on income: FBR Chairman

Withholding tax should be on income: FBR Chairman

Karachi, March 14, 2022 – The Chairman of the Federal Board of Revenue (FBR), Dr. Muhammad Ashfaq Ahmed, emphasized the need for a shift in the approach to withholding tax (WHT), suggesting that it should be levied on income rather than transactions. He made these remarks during an address at the Karachi Chamber of Commerce and Industry (KCCI) on Monday.

Dr. Ashfaq expressed his intention to recommend the abolition of certain taxes, and he underscored the importance of rationalizing import taxes as a means to alleviate inflationary pressures. He highlighted the challenges posed by Pakistan’s frequent engagements with the International Monetary Fund (IMF), noting that these recurring loan programs create complexity in the country’s policy-making landscape.

One of the key issues raised by the FBR Chairman was the current state of Pakistan’s fiscal dynamics, where revenue collection stands at 10% of the GDP, while expenditure accounts for 20% of the GDP. He pointed out that the country relies on loans amounting to approximately 8% of the GDP, contributing to fiscal challenges. Dr. Ashfaq identified the current account deficit as another significant concern, attributing it to the nation’s dependency on imported goods, particularly petroleum products and palm oil.

Despite these challenges, the FBR Chairman expressed optimism about surpassing the current fiscal year’s revenue collection target, crediting the performance of the business community for the positive outcome. He acknowledged the role played by the business community in achieving the revenue target, highlighting their commendable contribution.

Dr. Ashfaq addressed concerns related to the condition of providing CNIC details for transactions above Rs100,000, noting that the FBR has received representations on this issue.

Muhammad Idrees, President of KCCI, emphasized the importance of providing special attention to traders in Karachi, a city that serves as the financial and commercial hub of Pakistan. He recommended the implementation of a fixed tax regime to broaden the tax net, anticipating that such a framework would increase tax revenue.

Regarding the integration of retailers with the FBR, Idrees suggested that a framework should be devised to bring retailers into the sales tax net, simplifying the conditions for compliance.

Zubair Motiwala, Chairman of the Businessmen Group (BMG), congratulated the FBR Chairman on the achievement of tax collection targets. However, he raised concerns about the challenges faced by retailers due to difficulties in integrating point-of-sale (POS) systems with the FBR’s infrastructure.

Motiwala also questioned the impact of the additional revenue collection on the disbursement of refunds and highlighted the role of the FBR in contributing to inflation. He called for measures to stabilize the exchange rate, proposing a freeze on the dollar at Rs150.

The discussions at the KCCI event underscored the ongoing dialogue between tax authorities and the business community, addressing critical issues and exploring avenues for collaborative solutions to enhance fiscal management in Pakistan.