A few Members of the Federal Board of Revenue have opposed the idea of FBR Member Enforcement and Accounting to allocate Withholding Identification Numbers (WINs) or unique/separate identification numbers to withholding agents of sales tax and income tax including public sector companies.
Sources told Business Recorder here on Wednesday that the issue came to the light during the Board-in-Council meeting convened at the FBR Headquarters chaired by FBR Chairman Mumtaz Haider Rizvi. During presentation of the FBR Member Enforcement and Accounting Sardar Aminullah on withholding taxes, he shared the idea of allocating the WINs to the withholding agents to improve compliance by such agents.
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 has been proposed to be enforced to check all kind of deductions and payment of taxes.
The allotment of Withholding Identification Number has been drawn in the light of recent initiative undertaken by some 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 should be mandated to file quarterly returns with details of tax deducted from each individual/firm with proof of its having been deposited (challan) in the government account.
Sources said that the FBR had specified following persons as withholding agents and thus made liable to withhold sales tax and deposit the same to the credit of the federal government: It included 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. A number of withholding tax agents, both for sales tax and income tax, are not filers of withholding tax statements.
Few participants of the Board-in-Council were of the view that there is no need for allocating such unique identification or separate identification numbers for the withholding agents.
They have given the logic that a large number of withholding agents are already filing their withholding statements by using National Tax Numbers (NTN). The withholding tax statements are coming from the agents on the basis of NTN and sales tax registration numbers (STRNs) and this area should be given priority for improving compliance of the withholding tax agents instead of allocating additional identification numbers to the withholding agents. In the presence of submission of statements on the basis of NTNs of the headquarters, there seems to be no reason that every branch office of bank should file withholding tax statement.
According to sources, the issue of separate or unique withholding tax numbers to the agents would be thoroughly examined by the tax authorities and decision would be taken on the proposal of the FBR Member Enforcement and Accounting. So far, the proposal has not been rejected by the Board-in-Council and decision would be taken on the issue in due course of time.
During the Board-in-Council meeting, it has been pointed out that there is a need for monitoring and enforcement of withholding tax statements on monthly basis. A large number of withholding agents are not enlisted with the tax department who are required to file withholding tax statements. When a withholding tax statement is filed then it is required that the concerned tax officer should look into the completeness of statements and application of relevant deduction rates and provisions of the Income Tax Ordinance 2001. Under the law, withholding agents included every company, Association of Person (AOP) and every government department who is deducting tax whether on supply of goods or payment of salaried employees, and those individuals whose turnover exceeds a certain amount under the income tax law.
As far as loopholes in the existing system of withholding taxes, if the withholding tax statement is not filed by the agent, it is a loophole in the system. Secondly, if statement has been filed, but tax has not been properly deducted, it is also a loophole in the system.
Sources said that FBR Chairman Mumtaz Haider Rizvi told the Board-in-Council that the tax machinery has to meet the revenue collection target of Rs 1952 billion by the end of current fiscal. The message needs to be conveyed to the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) for achievement of the revenue collection target of Rs 1952 billion for 2011-2012.
It has been decided in the Board-in-Council that the field formations and all relevant agencies of the FBR have to meet the target without any exception. In this connection, LTUs and RTOs have to meet the assigned targets. The Directorate General of Intelligence and Investigation Inland Revenue has to meet the assigned targets. Similarly, Broadening the Tax-Base (BTB) Units have to meet the assign targets of bringing potential persons into the documented regime by the end of current fiscal. Directorate General of Intelligence and Investigation Customs and Model Customs Collectorates (MCCs) have to meet the given targets as well during 2011-2012.
FBR Members were happy over the new FBR Chairman Mumtaz Haider Rizvi, who is also from the taxation service. They showed full confidence in the new Chairman with the commitment to ensure achievement of the revenue collection targets. FBR Members were confident that the new Chairman from the tax group would be able to run the affairs of the FBR in a more professional manner in view of his rich experience in the Board as well as field formations for the last many years, sources added.
Meanwhile, a statement of the FBR issued on Wednesday said: A marathon session of the Board-in-Council of the FBR was held 15th February 2012. The exhaustive meeting started at 9:30 am and continued throughout the day. The members of Board highlighted the methodology for achieving the revenue target through extensively discussing each head of collection strategies were developed and time lines were framed.
The meeting continued for seven (7) hours where the Chairman gave broad outlines for achieving the targets based on the presentations given by members of the Board. The Chairman directed the Board members to ensure that the performance of FBR personnel is closely monitored by Chief Commissioners and Chief Collectors, and the under achievers be identified and action taken accordingly, based on HRM/IJP polices.
Member enforcement gave presentation on withholding taxes and informed the Board that there are 43,817 WH agents throughout Pakistan. He pointed out loopholes in withholding agents compliance level as the next area of focus by FBR. The FBR will include probe into tax-withholding Agents as part of its next four 4 months campaign. The Board will again discuss the revenue collection strategy in first week of March, 2012 after obtaining feedback from field formations, the FBR added.