FBR Planning to Reduce the Number of Withholding Tax Categories by 50 Percent

The FBR is viewing its options to reduce WHT by 50 percent, bringing the applicable categories from 50 to 25 in in the upcoming budget.

According to a report by a local English newspaper, The Federal Board of Revenue (FBR) has decided to abolish 25 different withholding taxes in the upcoming budget 2019-20.

“The government has decided to keep major revenue spinners of withholding taxes intact in the coming budget. All those WHT will also continue that are used as a tool for documentation of economy,” said a top FBR official.

The official data shows that there are some withholding taxes where the FBR is collecting negligible amount as the tax machinery has so far collected zero amount from advance tax on extraction of minerals under section 236 V, Rs 1.23 million from collection of tax by Pakistan Mercantile Exchange Limited under section 236 T and a meager amount of Rs 0.24 million from foreign produced TV plays and serials under Section 236 E of Income Tax Ordinance 2001 during the outgoing financial year.

It has been found that around 7 to 10 withholding taxes contributed to 85 percent collection under this head out of a total number of taxes standing at 50.

The FBR has so far collected Rs 800 billion in withholding tax in the current fiscal year and the board is considering to abolish almost half of the existing WHT in a bid to ensure ease of doing business in Pakistan.

The revenue board now intends to abolish all those WHT where it is causing impediments and resulting in cost escalation.

The analysis done by the tax machinery showed that the FBR generated a major chunk of withholding taxes from imports, salaries, dividend income, payment to non-resident, payment for goods, services and contracts, exports, electricity consumers, income from property, cash withdrawal from banks and purchase/transfer of immoveable property.

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