Withholding tax: I&I IR detects massive tax evasion by two medical colleges

05 Oct, 2014

The Directo-rate of Intelligence and Investigation Inland Revenue (IR) Islamabad has detected a massive tax evasion by two private medical colleges through misuse of withholding tax regime under Income Tax Ordinance 2001. Sources told Business Recorder on Saturday that the directorate has dispatched the necessary intelligence reports to all relevant Regional Tax Offices (RTOs) for necessary action against the private medical colleges under their respective jurisdiction involved in tax evasion.
The agency has ordered recovery of the unpaid withholding taxes by the said medical colleges. According to the directorate, medical education is big business in Pakistan and recent mushroom growth of private medical & dental colleges is witness to this assertion. Directorate I&I-IR Islamabad initiated a detailed analysis of private medical & dental colleges in Pakistan - an exercise aimed at ascertaining whether tax contribution of the colleges corresponds with their unprecedented growth and expansion? During this exercise detailed intelligence checks were conducted on different private medical and dental colleges.
The directorate carried out the first case study covering a medical collage located near Lahore and Faisalabad. The two private medical colleges are recognised by Pakistan Medical & Dental Council (PMDC), Ministry of Health. Though with effect from July 1, 2013, medical colleges are liable to collect and deposit tax under section 236I of Ordinance 2001 (collection of advance tax by educational institutions) @ 5 percent of annual fee being paid by the students, yet the two colleges did not comply with this. The FBR's tax withholding portal was also silent on compliance of legal obligations by the two private medical colleges. The agency has worked out the default u/s 236I during academic years 2013-14 and 2014-15.
As a part of eligibility criteria, Lahore and Faisalabad private medical colleges support an impressive faculty, mostly comprising of specialists and highly qualified doctors. Matching tax deductions at source u/s 149 (Salary) or 153 (1) (b) (Services) are also missing from FBR withholding portal. Directorate of Intelligence and Investigation Inland Revenue (IR) Islamabad has directed the RTO Lahore and Faisalabad to initiate immediate recovery proceedings u/s 236I, 149 and 153 (1) (b) of Income Tax Ordinance, 2001 and ensure enforcement of withholding statements.

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