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ISLAMABAD: Private medical colleges are involved in serious violations of income tax laws including non-deduction of income tax and misuse of the facility of Non-Profit Organisations (NPOs) and trusts.

Sources told Business Recorder that private medical colleges have proliferated across the country just like mushrooms. There are at least more than two dozen private medical colleges in the city of Lahore only.

The same situation exists in other big cities of the country. All these private medical colleges are being run and operated by the Trusts, who get approval from the Income Tax Department, in the capacity of Non-Profit Organisations. Though, they enjoy the status of NPO and claim exemption from taxation; however, the owners of private medical colleges are minting money with both hands.

Most of the medical colleges, once granted exemption through approval under the Income Tax Ordinance, do not apply for renewal of the same on a periodic basis, which is a mandatory requirement. They keep on misusing the once issued approval under the Income Tax Ordinance 2001.

These medical colleges are grossly involved in non-withholding of Income Tax, as provided under the law. This especially happens as the FBR does not conduct regular withholding tax audit; thus, resulting in a colossal loss of revenue. Due to this lukewarm attitude of the FBR offices towards a regular audit of withholding taxes, the private medical colleges make hay and are grossly involved in non-deduction of taxes.

Another major loophole in the taxation of medical colleges is fees charged from overseas medical students, which is in foreign currency.

Most of the times, these receipts do not reach the State Bank of Pakistan and are deposited somewhere out of country, thus again depriving the tax department from due withholding taxes on these receipts. Such receipts do not become part of accounts prepared for the tax department, thus committing tax evasion.

Still, another area of leakage and non-compliance is non-conformity of controlling trusts and medical colleges with the rules and regulations of the PMDC, which demand free medical treatment to at least 50 percent of patients in the affiliated teaching hospitals.

The above condition is essential for their registration with the PMDC and also to maintain their status of a charitable organisation. In this way, they also cheat and defeat the tax department as well, in getting their approvals as NPOs.

Most of the times, the private medical colleges do not truly reflect their number of enrolments of students to the tax department, as well as, to the PMDC.

At the same time, these private medical colleges get heavy donations from affluent parents which range from fifteen lacs to forty lacs. This donation money also does not find its place in declared revenue. The private medical colleges have worked out many such mechanisms to evade taxes and conceal the exact figures of receipts.

The controlling trusts also do not abide by laws and are being run as family enterprises in the name of charitable organisations. The FBR offices don’t have a well-defined mechanism to counter all these manoeuvres.

The relevant agencies must take cognisance of the prevailing situation, the sources added.

Copyright Business Recorder, 2023

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