Cash withdrawals from banks: WHT collection shows negative growth: FBR

ISLAMABAD: The withholding tax collection from cash withdrawal from banks stood at Rs 8.5 billion during July-December (2019-20) against Rs 17.69 billion during the same period of 2018-19, reflecting a negative growth of 51.9 percent.

According to the biannual review for 2019-20 issued by the Federal Board of Revenue (FBR) here on Thursday, the collection of the withholding tax on cash withdrawals from banks decreased due to abolishment of tax for income tax return filers.

The report revealed that the withholding taxes contribute a major chunk, ie, around 65.9 percent in the collection of direct tax. The WHT collection during first half of 2019-20 has been Rs. 544.5 billion against Rs. 449.4 billion during same period of 2018-19 indicating a growth of 21.2 percent.

The ten major 6 components of withholding taxes contributed around 61.5 percent of total WHT collection. These are: contracts, imports, salaries, bank interest & securities, dividends, electricity bills, exports, technical fee, income from property and cash withdrawals. As far as growth is concerned, collection from bank interest/securities grew by 118.8 percent followed by salaries (75.1 percent), electricity bills (29.4 percent), exports (28.4 percent), dividends and income from property each (19.4 percent). Growth in collection from bank interest can be partially explained by higher policy rate in this period, as well as upward revision of tax rate under this head. The growth in salaries can be attributed to reviewing the old tax slabs/tax rates on salary, wef, July 1, 2019. Similarly, growth in collection with electricity bills is due to increase in consumption of electricity and better enforcement measures through liaison with Discos. The growth in exports can be attributed to significant growth in exports during the period under review as compared to the corresponding period last. Also collection from cash withdrawals decreased due to abolishment of tax under this head for filers. The collection from contracts and technical fee grew by just 5.9 percent and 5.1 percent, respectively indicating lower economic activities and lesser government spending on the public sector development plan (PSDP).

Copyright Business Recorder, 2020