FBR warns of harsh penalties

KARACHI: The Federal Board of Revenue (FBR) has warned non-compliant withholding agents of harsh penalties including imprisonment and heavy fines, report official sources.

In guidelines on withholding taxes that were issued on Monday, the FBR said that those who failed to comply with the obligation to collect or deduct, and failed to pay the collected or deducted amount to the exchequer would be treated harshly.

“The person is treated as having committed an offence punishable on conviction with a fine or imprisonment for a term not exceeding one year, or both,” said the guidelines.

The FBR further said that the person, who failed to deposit the tax to exchequer within the stipulated time would be liable to pay a penalty of Rs25,000 or 10 percent of the amount of tax involved, whichever is higher.

In the guidelines, the FBR issued the prevailing withholding tax rates to be collected and deposited by the agents.

According to the FBR, the withholding tax was an effective mechanism and important source of revenue. The contribution of withholding tax is about 41 percent of total direct tax revenues. The collection under this head increased to Rs422 billion, posting an exponential growth over the last two decades from five billion rupees in 1991.

Important withholding provisions relate to salary, imports, exports, commission and brokerage, dividend, contracts, profit on debt, utilities, vehicles tax, stock exchange-related provisions and non-residents, with varying rates. Tax officials said that a number of taxpayers had been identified who collected withholding tax on behalf of the FBR but did not pay all of it to the relevant authorities.

They said that the enforcement drive launched by the FBR in 2011 had led to significant revenue generation. The officials suggested that more harsh penalties should be proposed by the FBR to ensure timely payment by the withholding agents.

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