Archive May 2020

‘Business activities to continue till May 31 as per notified timings’

Business activities all over Sindh will continue till May 31 as per the directives of the Supreme Court of Pakistan, said Minister for Information Syed Nasir Shah in a statement issued here on Thursday.

The federal government, in consultation with all the provincial governments, has imposed a lockdown till May 31. The Supreme Court, hearing a suo motu case (No. 01 of 2020) on May 18 had given directions that the business activities would continue to operate on all days till May 31.

The National Coordination Committee is scheduled to meet under the prime minister within the next two days to decide on what to do regarding the lockdown. Therefore, till May 31, the business activities would continue to operate as usual as per the timings ordered by the Sindh government through a home department’s notification.

Source: The News

Documenting economy: FBR urged to use data of bourse, the property market

Pakistan Business Council (PBC) has asked the Federal Board of Revenue (FBR) to use stock market/property data and the National Database and Registration Authority (Nadra) information for documenting the economy and providing a level-playing field to the domestic manufacturing from the next fiscal year.

According to the budget proposals of the PBC for 2020-21, the FBR has got access to financial data in various forms including the monthly statements submitted by withholding tax agents of the various withholding deductions made by them.

This can be a start to bringing new taxpayers in the net.

In addition, the FBR has also collected data about tax paid by non-filers on property and on gains made in the stock market.

The information as per statement filed under Section 165A and the NADRA records are also available.

This can be a start to bringing new taxpayers in the net, the PBC added.

The number of taxpayers needs to be increased; the narrow taxpayer base is leading to greater pressure on the existing taxpayers.

An increase in the tax base will reduce the FBR’s ever increasing reliance on existing taxpayers, it proposed.

The monthly sales declared by commercial importers should be matched with sales declared in annual income tax return as well as the credit entries in all business bank accounts.

In case of any discrepancy, reconciliation with justifiable reasons should be submitted by the commercial importers.

Online CREST system must be amended in a way to trace sales along with value addition, thereon of person to whom supplies were made by the commercial importers.

The PBC has proposed that the concept of separate withholding tax rates for filers and non-filers was introduced as a measure for increasing documentation of the economy.

Though large amounts are being collected from non-filers, no effort has been made to increase the tax base.

Non-filers for the most part have built the cost of this government levy into pricing and passed it on to their customers.

The withholding tax regime should be simplified by reducing the number of rates significantly.

The current withholding tax guide available on the FBR website is a 76-page document, clearly shows the complexity of the regime from compliance and ease of doing business.

There needs to be a significant distinction in the withholding income tax rates charged from non-filers vs the rates for filers.

Across the board, massive under-invoicing and dumping of imported products have been increasing.

Information regarding values at which various custom check posts clear import consignments is not publicly available.

This encourages unscrupulous importers to under-declare the value of consignments to evade government revenues, it proposed.

In order to broaden the tax base and to achieve an increase in overall tax collection without burdening existing taxpayers, the policy to increase the tax on non-filers/unregistered persons should be implemented specifically in the following cases:

a) unregistered industrial/commercial entities (not having STRN) having bill amount in excess of Rs20,000 per month, extra sales tax should be increased from five percent to 20 percent.

b) After collection of extra tax as referred above for a continuous period of six months, all these connections should be provisionally converted into NTN and STRNs and return filings from these connections should be enforced.

c) In case of provisional registration as above, utility companies be directed to issue show cause notices where annual billing amount exceeds Rs2.4 million and directing provisionally registered persons to obtain permanent registration.

In case of non-compliance, utility companies be directed to disconnect utility connections.

d) Moreover, in order to bring all commercial/industrial users in the tax net and to verify filer status, electric distribution companies should provide one year to all such consumers to get their NTN registered with electricity distribution companies.

In case of failure to provide NTN, electricity connection should be disconnected.

Considering the fact that all industrial/commercial connections will be linked with the NTN, the tax department will then be in a better position to assess the electricity consumed by commercial/industrial users and corroborate the same with amount of sales/production etc. reported in sales tax/income tax return.

e) In order to bring all commercial/industrial users in the tax net and to verify filer status, electric distribution companies should provide one year to all such consumers to get their NTN registered with them.

Thereafter, such commercial/industrial consumers without NTN should be charged advance income tax at 30 percent (from existing 12 percent) on their utility bills.

Those with NTN but non-filer status be charged at 20 percent WHT.

f) Residential consumers be made liable to provide NTN in case electricity bill amount exceeds Rs1.2 million per year or levy advance income tax withholding of 20 percent.

g) All exemptions (like exemption on agricultural income) under the Income Tax Law should only be made available to filers, so that exempt income is also reported and wealth is reconciled.

h) Withholding tax on international business class tickets under Section 236L is same Rs16,000 for filer and non-filer, it should be increased to Rs50,000 for non-filers.

i) Withholding tax at five percent or Rs20,000, whichever is higher, is applicable under Section 236D on all functions organized by filers as well as non-filers. Rate of withholding be increased for non-filers to Rs100,000 as minimum and no WHT from the filer, PBS added.

News Sources: https://www.brecorder.com/2020/05/28/600647/documenting-economy-fbr-urged-to-use-data-of-bourse-property-market/

What is Withholding Tax (WHT)?

withholding tax

Withholding tax is a requirement of government for the buyer of any service or item of income to withhold or the deduction of tax from the payment which is paid to the government.

Why Withholding Tax?

  • Less interference with the tax authority
  • Helps to expand the tax net
  • Daily basis revenue generation
  • Includes Tax Evasion
  • Economics documents
  • Maintaining flow with the least cost

Withholding Tax Trend:

Withholding tax (WHT) regime is a worldwide trend and the largest source of national revenue in Pakistan. The dependence on WHT has also been on the rise in recent years. Of the 740 (b) direct tax reserves for the financial year 2012, Rs.422 (b) with a share percentage of 57% was derived from different holding taxes.

Scores Of Withholding Tax:

WHT has been part of the tax system in one way or another since Government and taxpayers directly taxed the two scores.

  • Provides regular revenue to the government for its expenses and operations throughout the year
  • It provides taxpayers with an opportunity to meet their obligations in qualifying installments.

Directorate General of Withholding Tax:

Currently, globalization has forced many countries to adapt their economies to new trade and investment policies included in free trade agreements, tax policies, and alignment. Countries cannot close their borders or their economies. Tax policies are inseparable from international economies. Therefore, the Directorate General of Withholding Tax has been set up by the Finance Act 2008 under Section 230A of the Income Tax Ordinance 2001 to review and manage these holding tax systems while maintaining this competitive environment.

Also Read: What are the penalties of being non-filer?

Efficient Source Of Revenue:

WHT is an efficient source of revenue. Their share of direct tax revenue is about 41%. Rise of Rs.422(b) in 2012 as compared to Rs. 5(b) in 1991 talks about rapid growth and consequent heavy dependence on withholding tax.

According to the Income Tax Act, 1922 tax deduction was from two source salaries and interest on securities. Different provision of the tax law was introduced later to extend WHT net in the 1990s, by providing WHT on large-scale transactions.

The main withholding provisions are related to salaries, imports, exports, commissions and brokerage, dividends, contracts, loan interest, utilities, car taxes, stock exchange provisions, and non-residents, etc. with different rates.



What are the penalties of being non-filer?

penalties of being non-filer

Being a responsible Pakistani, if you haven’t filed your tax then you will have to face the penalties of being non-filer. According to PkRevenue , the date on which you pay your taxes has expired or you may not have the information for your return completion, or you may not have enough money to pay taxes and you may be afraid to file your return. In any case, the non-payment of taxes has serious consequences.

Those who do not file their tax will be caught sooner or later.

We have all heard many stories of income tax denials, whether they are straightforward tax dodgers or political demonstrators everyone has to face major civil penalties as well as criminal penalties of fines and imprisonment.

 Beware, the thing you were not told is that failure in filing tax returns can be very costly.

According to Tax laws:

According to Income Ordinance, 2001, tax laws define both lenient and severe penalties for the individuals who have taxable income but not paying their tax or the individuals who are registered with tax authority but their annual returns are not filed or filed after the due date.

Specification of the number of Fines and penalties :

The Income Tax Ordinance, 2001 specifies the number of fines and penalties for non-compliance. Section 114 of the Ordinance deals with the persons who are required to file their annual income tax returns and Section 116 relates to wealth-related statements.

Penalties Under Section 114:

According to section 114 the person who fails to return the required income within the due date will have to face penalties of being non-filer which are the following :

Penalties for late filing income tax   0.1% of the tax payable in respect of the defaulted tax year on each day and a maximum of 50% of the tax payable

Provided that the above-mentioned fine is less than Rs. 40,000 or no tax is paid in this tax year, then such a person will have to pay a fine of Rs. 40,000


Provided that if the income amount is 75% of the income amount coming from salary and the amount of income from salary is under Rs.50 lakhs, the penalty amount, in that case, will be at least Rs.5,000



Penalties for failure to present the statement of wealth and Reconciliation of Wealth Statement   Such a person will have to pay a penalty of 0.1% per week of taxable income or Rs.100,000 whichever is excessive
Penalty for failure to submit foreign assets and income statement within the due date An individual has to pay 2 % of the income of foreign income or assets each year  
Penalty for the fake or misleading written, oral or electronic statement to Inland Revenue Authority or to an Income Tax Authority   Rs. 25,000 or 100% of tax amount whichever is higher an individual has to pay

According to section 182 A:

According to section 182 A, FBR declares that the taxpayers who will not file their returns within the due date will not appear in the active taxpayer’s list for the year the returns have been paid that person will be included in active taxpayer list only in the condition if he pays he following surcharges:

Categories of Taxpayers   Surcharges at Rupees
For Individual 1000  
For Company   20,000  
For an Association of a Persons   10,000

Penalties Under Section 191:

Further penalties according to the income tax ordinance under Section 191 for the person who fails to submit a notice under subsection (3) and subsection (4) of section 114 of subsection (1) of section 116. Commit a crime or offense with a fine or imprisonment for a term not exceeding one year.

More Penalties of being non-filer:

Taxpayer’s failure for presenting a return of income or wealth statement without any excuse within the period prescribed by the court is considered as a crime and is punishable according to which a person is liable to a fine, not more than fifty thousand rupees or imprisonment not more than two years, or both.