ISLAMABAD (January 12 2009): The Federal Board of Revenue (FBR) is examining a proposal to set up a separate function of withholding tax in each Regional Tax Office (RTO) for proper enforcement of withholding provisions under the Income Tax Ordinance 2001.
Sources told reporters on Saturday that the board is seriously considering two proposals for changes in the organisational structure for improving withholding tax collection in 2009.
First proposal is to create a separate function of withholding tax in each RTO. Like audit, legal and enforcement functions at Large Taxpayer Units and RTOs, the same kind of 'Withholding Function' could be created for monitoring of WHT.
The second proposal is to depute a withholding tax director on the pattern of regional commissioner in each city. The director would report to the Director General of Withholding Tax in Islamabad. These directors would have separate enforcement functions to directly interact with the withholding tax agents and government departments for monitoring and enforcement of withholding taxes.
Sources said that the board could generate extraordinary amount through effective withholding tax collection. However, this requires immediate establishment of separate withholding departments in each regional office.
According to sources, better monitoring and compliance would generate revenue from banks, salaries and public sector development projects (PSDPs).
The board is strictly monitoring key sectors including banks, cement and oil exploration/marketing companies for improving withholding tax collection for which a new work plan has been implemented across the country.
The DG WHT has prioritised important sectors in view of their contribution in the form of WHT. The sectors are banks/financial institutions; National Savings Schemes; Public Sector Development Projects (PSDPs); importers/exporters, government departments; oil exploration and marketing companies; cement; textile; developers and contractors (construction sector); real estate; rental property ie domestic and foreign missions; motor vehicles and other potential sectors.
The department would also take measures to generate WHT from the sales and supplies made within the manufacturing sector. This sector would be given top priority for which action plan is ready to be implemented.
This new strategy would help the department to improve WHT collection despite lack of infrastructure, workforce and low level compliance by the withholding agents.
The monitoring of these sectors would cover four major situations of deduction and withholding of the levy. Firstly, it would be seen whether tax was withheld. It would include those cases where tax was not deducted. Secondly, tax was deducted but amount was short. This would be known as “short-deducted” amount of tax. Thirdly, tax deduction had been made, but the amount was not deposited in the national exchequer. Fourthly, tax deducted had been deposited but it was liable to penalty due to late deposit.