First half shows 9% drop in withholding tax collection

Islamabad: The collection of withholding taxes has dropped by 9% during the first half of the ongoing fiscal year, a news source reported. This drop accounts for a little over two-thirds of the total income tax collection amount. The development is expected to fall in-line with the government’s plans to be less reliant on withholding taxes.

So far, the Federal Board of Revenue (FBR) collected PKR 449 billion in withholding taxes. This is almost 68% of the total direct tax collection in the current fiscal year. Compared to previous year, the same time period indicated a share of 74%. The overall decrease was recorded at 8.7%.

Read: FBR issues notices to 6,451 wealthy non-filers

Reports indicate the following reasons for the decrease:

• Reduction in income tax rates for the salaried class
• Limiting the Public Sector Development Programme in order to compensate for the increasing debt of servicing and defence costs
• Supreme Court’s (SC) decision to abolish withholding tax on prepaid mobile cards

If these decisions are reversed in the coming months, the share of withholding taxes may increase.