Over 957 WHT agents: FBR planning to allocate WINs

The Federal Board of Revenue (FBR) is planning to allocate Withholding Identification Numbers (WINs) or unique identification numbers withholding agents of sales tax and income tax including public sector companies to ensure compliance by agents having National Tax Numbers or Free Tax Numbers (FTNs).
Sources told Business Recorder here on Sunday that the level of non-compliance by withholding agents in Pakistan is evident from the FBR''s data showing astonishing position during 2011-12. Out of over 957 withholding agents in the public sector liable to file sales tax returns, only 50 are filing their sales tax returns. Around 907 withholding agents have failed to file their sales tax returns out of 957 units, reflecting highest level of non-compliance. Even the figure of 957 is not authentic and actual withholding agents liable to file sales tax returns could be much more. The FBR intends to issue WIN or unique identification numbers to withholding agents for both sales tax and income tax. The concept of WIN has been taken from the best tax administrations which have effectively monitored withholding taxes. This would be first time in Pakistan that allocation of WIN would be enforced to check all kinds of deductions and payment of taxes.
According to FBR, under the provisions of SRO 660(1)/2007 dated June 30, 2007, following persons have been specified as withholding agents and thus made liable to withhold sales tax and deposit the same to the credit of the federal government with effect from July 1, 2007: Federal and provincial government departments; autonomous bodies; public sector organisations; taxpayers falling in the jurisdiction of Large Taxpayers Units for the purpose of sales tax, federal excise, and income tax; and recipients of service of advertisement who are registered for sales tax.
During a joint exercise on withholding taxes conducted by FBR and Pakistan Revenue Automation Limited (PRAL), it was observed that a large number of withholding tax agents, both for sales tax and income tax, are not filers of withholding tax statements. Most of them are not even formally registered with sales tax/income tax. At the same time, position of their "payees" is not dissimilar, the FBR said.
It said that considering the huge volume of revenue involved in withholding taxes, it would be appropriate to draw up a special mechanism for registration and enlistment of all withholding tax agents whether having an NTN or FTN. Moreover, except e-filing of withholding tax statements, there is no IT application in place that could be used for examination of statements and audit of withholding taxes.
The FBR further said that the enforcement activity with respect to withholding agents in federal and provincial government departments, autonomous bodies, public sector organisations, and recipients of advertisement services is not undertaken in the right earnest and there is a lot of room for improvement. Therefore, a phased strategy to improve upon monitoring of enforcement activity with respect to sales tax withholding agents is proposed to be undertaken.
The FBR said that there are around 957 withholding agents in the public sector who are holding Free Tax Numbers (FTN) and are liable to file monthly sales tax returns prescribed for withholding agents. On the contrary, the number of filers is around 50 only. The allotment of Withholding Identification Number will be drawn in the light of recent initiative undertaken by some of the other countries which involves registering all such deductors (organisations) with the FBR who should be allotted a special Withholding Identification Number from a central location in FBR. These WIN holders be mandated to file quarterly returns with details of tax deducted of each individual/firm with proof of its having been deposited (challan) in the government account.
The FBR has decided to take following steps to improve and expand the sales tax withholding regime: Firstly, all withholding agents including those identified as per the list and who are required to comply with the provisions of SRO 660(1)/2007 should be enlisted. Secondly, special department should be set up in each LTU/RTO to identify withholding agents, in respective jurisdiction of each unit, who are liable to comply with the provisions of SRO 660(1)/2007 but who have neither obtained WIN nor are filing returns of withheld sales tax, and quite possibly may not be withholding sales tax. They should be asked to immediately apply for WIN and monitoring of filing of returns by them should be undertaken thenceforth. Thirdly, the Core Business Domain Committee has been asked to look into the matter in consultation with PRAL. The software for enlistment of withholding tax agents may be further developed by PRAL while for management of withholding taxes a new software may be developed on the basis of a competitive bidding in view of urgency and potential in timely collection and deposit of withholding sales and income tax.
Moreover, the registration process will be a new that should cover both categories of withholding agents--taxpayers including NTNs, and those holding FTNs. The proposal has been submitted for approval of the concept of allotment of a unique identification number to withholding agents of sales tax and income tax., the FBR added.