Tax revenue from non-cash banking transactions up 13pc in July-April

KARACHI: The Federal Board of Revenue (FBR) collected Rs16.25 billion in withholding tax on non-cash banking transactions made by non-filers in the first 10 months of the current fiscal year of 2018/19, up around 13 percent year-on-year, as the government raised taxation to encourage filing of returns, sources said.

The sources in the FBR said collection of withholding tax on non-cash banking transactions made by non-filers amounted to Rs14.42 billion in the July-April of FY2018. Growth in revenue collection was attributed to increase in tax rate to 0.6 percent through the Finance Supplementary (Amendment) Act 2018 from 0.4 percent.

The previous government in the last budget reduced the tax rate.

But, the present government in its first mini budget in September revised up withholding tax rate on non-filers for banking transactions to 0.6 percent. Through Finance Supplementary (Second Amendment) Act 2019, it however withdrew the imposition of withholding tax on cash withdrawal by income tax return filers.

Through the Finance Act 2015, the government introduced a section (236P) into the Income Tax Ordinance 2001 and imposed 0.6 percent withholding tax only on non-filers of income tax returns on aggregate transactions of Rs50,000/day. It however reduced the tax rate to 0.3 percent in the same fiscal year after protest from stakeholders.

Later, the tax rate was increased to 0.4 percent in March 2017 and finally the rate was made part of the statute through Finance Act 2018.

The FBR officials said a large number of non-compliant taxpayers are making huge banking transactions. Deposit base of the banking system increased to record Rs13.45 trillion by March 2019.

“Compliance rate has significantly been increased due to imposition of tax on non-filers,” an Federal Board of Revenue official said. Income tax returns filing for tax year 2018 increased to record 1.96 million compared with 1.84 million a year ago.

The FBR officials said the government planned to further burden non-filers in the upcoming budget to improve tax compliance.

The government is also intending to facilitate the return filers by withdrawal of withholding tax law and reduction in rates.

Rise in withholding tax rate on non-cash banking transactions also increased the tax collection by 41 percent in April 2019.

The Federal Board of Revenue collected Rs2.59 billion in April 2019 as compared to Rs1.839 billion in the same month of the last year.