ISLAMABAD: The government has wrongly shown Rs3.207 billion "Workers Welfare Fund (WWF)" as a federal direct tax of the Federal Board of Revenue (FBR), and part of the FBR's tax projections for 2020-2021.
Budget documents (2020-2021) revealed that within the category of direct taxes, the target of income tax has been set at Rs2,036 billion for 2020-2021 against the revised target of Rs1,618 billion for 2019-2020, showing an increase of Rs418 billion. Target of the WWF has been set at Rs3,207 million for 2020-2021 against the revised target of Rs2,548 million 2019-2020, reflecting an increase of Rs659 million.
The WWF has been shown as part of the direct taxes projections of the FBR for 2020-2021.
Tax experts told Business Recorder here on Wednesday that the Table 4 "Tax Revenue" of the budget documents shows "Workers Welfare Fund" as a Federal Direct Tax. Vide judgment dated 11.10.2016 in Civil Appeal No. 1049/2011 and others (2017 PLD 28), the Supreme Court of Pakistan has held that the WWF contributions/payments do not constitute a tax.
Moreover, the subject of "welfare of labour" has been devolved to the provinces under the 18th Constitutional Amendment Act of 2010, by way of omission of the Concurrent List of the Fourth Schedule to the Constitution.
The provinces of Sindh and Punjab have already legislated their respective Workers Welfare Fund Laws.
The federation cannot collect WWF in relation to these two provinces. In any case, the federation cannot show WWF receipts, even if collected for the provinces of the KP and Balochistan, as the federal direct tax receipts.
The question arises that how can the federal government show this as a federal tax receipt in its budget documents?
A leading tax expert was of the view that in utter disrespect of judgment of the Supreme Court of Pakistan that WWF does not constitute "tax", and therefore cannot be made part of the money bill, the same is shown as part of collection of taxes by the FBR.
It shows that the Ministry of Finance, while preparing budget, Law Ministry, while vetting it and Cabinet at the time of approval overlooked the binding judgment of the Supreme Court committing breach of Article 189 of the Constitution.
The WWF is now within the domain of provinces, and Sindh and Punjab have already enacted their own laws to be collected through Sindh Revenue Board (SRB) and Punjab Revenue Authority (PRA) respectively.
The collection of the WWF on behalf of the KPK and Balochistan by federal government, as they have not enacted their laws, cannot be part of collection of the FBR. It amounts to overstating its collection figure.
The WWF for Islamabad Capital Territory (ICT) must appear as non-tax collection of the federal government.
Amount collected from employers in the KP and Balochistan cannot be shown as collection of the FBR, they added.
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